Spark is pulling out of its sports pay TV business next year, a move driven in no small part by the cost of content rights.

The New Zealand operator has brokered a deal to transfer its sports content rights to television network TVNZ from 1 July 2023, after which point its Spark Sport streaming service will effectively cease to exist.

“In making the decision to exit the sports streaming market, Spark noted escalating content rights costs and a broader range of investment opportunities across its business as the key drivers of the decision,” the incumbent telco noted in a statement late last week.

So, as well as baulking at the cost of top-end sports rights, the telco is also keen to channel funds back to its telecoms business. That’s a pattern we have seen across the telecoms world, in various guises, in recent times.

It’s only a matter of months since BT closed its deal with Warner Bros Discovery to merge its costly BT Sport unit into Eurosport UK, for example. Yet Vodafone Spain pulled out of the football market, again on cost grounds, as long ago as mid-2018. And in the interim we have seen telcos dabble in sports with mixed success; TIM’s football content deal with rights holder DAZN turned its balance sheet into a gloomy read, to name just one. Meanwhile, across the pond AT&T and Verizon have both exited once highly-prized content assets in the past couple of years, reinforcing the growing message that telcos and expensive content do not mix well.

Against that backdrop, Spark’s decision to pull out of sport can hardly be seen as a shock. But it’s worth remembering that when it launched Spark Sport in 2019 the telco brought some welcome competition to the market, giving Sky a run for its money on rights acquisition.

However, while competition in the premium rights market gives consumers more choice, it also pushes up the price of content, and therein lies the problem.

“It has been challenging to reach the scale we aspired to across the Spark Sport platform, with Covid causing major disruption to sporting codes globally just a year after launch,” said Spark Chief Executive Jolie Hodson.

“That slower than expected start, coupled with the escalating costs of content rights globally, makes it difficult to justify the type of investment Spark Sport requires when we have a wider range of investment opportunities across our broader business,” she added.

The chief exec did not expand on Spark’s investment plans, but it’s probably safe to assume we’re talking about investment in 5G and digital services, rather than content and media.

Although Spark has hammered out a deal with TVNZ, the future of its content remains up in the air, given that the companies need to secure the agreement of the individual rights holders before any transfer of rights can take place. Spark said it has already reached agreement with one of the big ones though: New Zealand Cricket. As such, related rights will transfer to TVNZ from the start of the upcoming 2023/24 season. The companies are holding talks with other rights holders and have pledged to share more details in the new year.

There is also a hint that a job cuts announcement could be in the offing, although Spark hasn’t had much to say on the subject so far.

“As the Spark Sport platform winds down we will also be working with our people to look for redeployment opportunities across our broader business wherever possible,” Hodson said.

Not much to go on there, but that must be a worrying comment for some, despite Spark’s best efforts to sound an optimistic note with this decision.

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