How the power of sports content killed the Voda/Sky merger

The Commerce Commission has given its full statement of reasons for blocking the planned merger of Vodafone NZ and Sky saying it believes the merged entity’s power over premium sports content would kill competition in both the fixed broadband and mobile markets.

The Commission announced in February that it would block the merger on the grounds that it would be likely to lessen competition by creating a strong vertically integrated pay-TV and full service telecommunications provider owning all premium sports content.

In its full — heavily redacted — 145 page statement, released on 13 April it noted that the merged entity would control the rights to broadcast all New Zealand premium live sports content: rugby, cricket, NRL and netball until at least 2020.

Furthermore, the commission considered it likely that the merged entity would continue to control the rights to this premium live sports content after they come up for renewal.

It also considered that the nexus between premium sport content and broadband and mobile services could only strengthen over time. “There is evidence suggesting that premium live sports content will increasingly be viewed over the internet in the future as broadband and mobile services and pay TV converge,” it said.

“As this happens, we consider that consumers are likely to value more highly bundles containing both content and the means to deliver that content (broadband and mobile). Bundles offered by a single supplier such as the merged entity are likely to be even more attractive to consumers who view their content and broadband and/or mobile services as closely related, if not as one and the same thing.”

The commission concluded that the merged entity “would be uniquely positioned to exploit changing consumer preferences by offering bundles that bring together pay TV services and broadband and/or mobile services.”