We knew there was something wrong at Sky Network TV (which is listed on both the ASX and NZX) when they posted their first fall in subscriber numbers in 20 years. Upon investigation, we found that NZ brokers were hesitant to say anything negative about Sky as many of their clients owned it, and NZ is a relatively small market. One of the arguments that NZ brokers put up was that everyone in New Zealand gets rugby, and they won’t want to drop their rugby, it’s just too important. In fact, only 75% of Sky TV’s customers were getting the rugby anyway, so there’s quite a lot of people that could drop their Sky TV subscriptions. Despite a short relief-rally, the stock has since fallen on the back of a further downgrade, but it might not be over yet. We think there are further downgrades to come.