Sky TV Acquires Three: A Strategic Move for the Future of Free-to-Air TV in New Zealand

In a significant development for New Zealand’s media landscape, Sky TV has announced the acquisition of Discovery NZ Ltd, the parent company of free-to-air channel Three, for a symbolic $1. The deal, described as debt-free and highly strategic, has already sparked positive market reactions, with Sky shares rising over 5% following the announcement.

Sky CEO Sophie Moloney emphasized that the primary driver of the deal is the acquisition of ThreeNow, a broadcast video on demand (BVOD) platform. This move allows Sky to bypass the high cost and risk of developing its own streaming service, while gaining access to a growing digital audience. Moloney also noted the potential for increased audience reach, which could be a key factor in securing future rugby broadcasting rights.

The merger is expected to take 12 to 18 months to fully integrate, with no immediate changes to Sky Open or Three’s current operations. Sky has confirmed its commitment to maintaining Three’s presence on Freeview, ensuring continued access for viewers.

Despite the acquisition, there are no immediate plans to merge online services or extend news programming to Sky Open. The Stuff-produced 6pm news bulletin, ThreeNews, will continue as is. Warner Bros Discovery Australia-New Zealand managing director Michael Brooks also confirmed that there are currently no discussions about layoffs.

One of the key factors in the deal’s approval was the assurance from Warner Bros Discovery that it would fold its operations in New Zealand if the acquisition was not approved. However, Brooks clarified that this was not the case, and the deal was mutually beneficial for both parties.

With the acquisition, Sky expects to see an immediate boost in free cash flow and an increase in operating earnings of at least $10 million by 2028. The deal also aligns with Sky’s 2023 commitment to double its dividend to 30c per share by 2026.

The Commerce Commission has given the green light for the merger, stating that it does not intend to investigate further. The deal comes at a time of significant change in the New Zealand media sector, with other major moves, such as Trade Me’s acquisition of a 50% stake in Stuff Digital and the global streaming giant DAZN’s purchase of Foxtel.

Media and Communications Minister Paul Goldsmith has welcomed the deal, stating that it represents an investment in New Zealand media and will make Three stronger and more sustainable. He emphasized that the focus should not be on the $1 price tag, but on the investment in the future of TV Three and Sky.

The acquisition is expected to deliver a range of benefits, including increased revenue, a broader audience reach, and improved advertising revenue shares. It also provides a clear pathway for Sky to achieve sustainable growth and increased free cash flow in the coming years.