Sky New Zealand has acquired Warner Bros Discovery‘s local channels business for a token sum of NZ$1 (60¢).
The surprise deal will see Sky becoming New Zealand’s dominant TV media player by acquiring 100% of the shares in Discovery NZ from Discovery Networks Asia-Pacific, a subsidiary of WBD, on a cash-free, debt-free basis. It will have around 35% of the linear TV ad market revenue share and 24% of the digital TV equivalent.
The deal includes free-to-air channel Three and its streaming platform, ThreeNow, along with a range of other linear and free ad-supported streaming television channels such as HGTV in New Zealand. A multi-year content supply arrangement for WBD content to its former channels has also been agreed.
The HBO Max and Warner Bros International Television Production businesses are not included in the agreement and will remain with WBD, which is focused on rolling out its international streaming service around the world and, like rivals, wrestling with the economics of traditional TV.
Sky and Discovery NZ are working together to structure a transition plan that will see the latter’s team join the former in coming months. Integrations costs are projected at NZ$6.5M. Juliet Peterson, Vice President, Head of Networks at Discovery NZ, will continue to lead the business, reporting to Sky CEO Sophie Moloney.
In a presentation to shareholders, the NZX-listed Sky said the deal would provide an immediate revenue uptick of NZ$95M and positioned the company to become “Aotearoa NZ’s most engaging and essential media company.” Discovery NZ is expected to deliver EBITDA of “at least” NZ$10M from full-year 2028, with underlying free cashflow achieved by the end of next year.
The deal is expected to close on August 1. The New Zealand Commerce Commission was given confidential notice of the deal and has advised both sides it does not intend to stand in the way.
“This is a compelling opportunity for Sky that directly supports our ambition to be Aotearoa New Zealand’s most engaging and essential media company. It positions us to scale faster, accelerates our growth, and further diversifies our revenue streams, particularly in advertising and digital. We are acquiring a business with complementary operations that is a strong strategic fit for Sky, in an accretive way for our shareholders,” said Moloney. “In particular, acquiring the established and fast-growing ThreeNow BVOD platform adds an important missing component to Sky’s portfolio, without incurring the significant brand and
WBD’s linear and pay-TV channels have been running at a loss for some time, posting big losses in the face of falling TV advertising spend. Upon announcing that up to 350 jobs would go in restructuring last year, WBD APAC President James Gibbons said that, “Apart from 2009, the year following the global financial crisis, this was the single largest year-on-year drop in 30 years – a 14.3% drop.” He claimed NZ$74M of TV ad money had disappeared in 2023.
WBD closed news service Newshub last year, as New Zealand’s traditional media businesses struggle to compete with streaming rivals and the shift to digital-first operations. Michael Brooks, Managing Director Australia and New Zealand for WBD, said today’s announcement was “This is a fantastic outcome for both WBD and Sky.”
He added: “The continued challenges faced by the New Zealand media industry are well documented, and over the past 12 months, the Discovery NZ team has worked to deliver a new, more sustainable business model following a significant restructure in 2024.
“While this business is not commercially viable as a standalone asset in WBD’s New Zealand portfolio, we see the value Three and ThreeNow can bring to Sky’s existing offering of complementary assets. The transaction includes a significant and ongoing content supply agreement for WBD’s premium content, for the mutual benefit of both parties.
Moloney said that, “Notwithstanding the ongoing challenges faced by the Discovery NZ business, Sky is uniquely placed to give effect to this opportunity to accelerate our growth strategy.”
