Craig Heatley

"‘I think Nate would rather have had Craig back out of the whole thing and let Nate and Time Warner, and to a lesser extent TCI, take over, really,’ Downey says. ‘Nate tended to keep Craig out of the loop and Nate saw his reporting line as back to Jeff Schwall in the US, who was the Time Warner director to whom Nate reported. That was okay to a point because Time Warner was a huge influence on the HK Partnership. But it did mean that Craig felt not consulted when he should have been and when he saw himself—because of him and Terry having founded the whole operation—as having special rights. That led to persistent misunderstandings and conflicts between Craig and Nate. Both sides were in the wrong. Craig did poke into matters that a chief executive should have handled without difficulty, and Nate did withhold information from directors, including Craig, where he should have consulted us instead of consulting Jeff Schwall.’"

"At Sky, John Fellet regrets that Heatley and other entrepreneurs like him, including Alan Gibbs, Trevor Farmer, Sir Michael Fay and David Richwhite, created thousands of jobs ‘then almost as quickly, they packed up and left or went underground’. Partly, he thinks that tall poppy syndrome, which as an American he had never heard of before arriving in New Zealand, played a part. ‘They were similar in not wanting attention drawn to themselves and maybe that’s just the Kiwi way, but in the US, Craig Heatley and Trevor Farmer would be actively involved in major corporations. They would be more like the Warren Buffets, adding shareholder value and, yes, enriching themselves, but also enriching the New Zealand economy. Now I am sure that they have investments that do enrich the economy but they all seem to be off on their islands, Craig on Moturua, Richwhite on Mercury Island, and it’s a pity because that kind of brain power is a huge driver of economic growth and to have it sitting on the sideline at too young an age, especially in Craig’s case, is a shame.’"

"One Saturday, he dropped off his mother and drove through to Foxton. He ambled along the main street, killing time. Pausing to look in the window of a real estate agency, Rod Weir & Co., he saw an advertisement for a block of land with ‘subdivision potential’ near the local racecourse. It cost $10,000. Heatley at the time would have had about $800 if he had sold his shares and added the proceeds to his Post Office savings. He opened the door and walked in. Just as Ron Jarden had taken Heatley’s call a few years earlier, so the agent took him seriously now, even though Heatley openly admitted that he was at school and had little money. But he had time and was interested in the property so the agent drove him to look at the land, which was covered in weeds and scrub. Heatley was impressed by the size of it and could see, when the agent pointed it out, how it could be turned into a residential subdivision. He could also see how he could make money from it. This, at last, was the potential for real earnings. Driving home, he excitedly told his mother about the land and its potential. She was incredulous that he would consider anything so absurd but probably comforted herself knowing that nothing could come of it because her son could not possibly afford it. But Heatley could not let the idea go. At school and in the evenings, he considered what he would need to do to create a subdivision. He contacted a surveyor and the next time Heatley went to Levin, they met. Once again, Heatley’s easy manner, his frankness in admitting this was all new to him and his ability to see past the numerous obstacles in his way gained him a sympathetic hearing. Did the real estate agent and the surveyor, perhaps learning that his father had died, feel sorry for him? Or did they simply think that if this foolish kid was prepared to risk his deposit, they might as well take it off him? Heatley does not know but after several long discussions with the surveyor about section sizes, prices, utilities and planning rules, he felt sufficiently confident to make an offer. Heatley confessed he had nothing like the $10,000 asking price. The agent said he would accept $1000 as a deposit. Heatley went to a bank to ask for a loan and was turned down. He went back to the agent and said he could offer $200 now and the balance of the $10,000 would have to wait until some of the sections could be sold. There must have been no sign of a better offer. The agent accepted the terms and with that Heatley became the schoolboy-owner of several scrub-covered acres of undeveloped land in Foxton, with a $9800 debt that he had no way of paying unless his foray into property development, about which he had so recently known nothing, was successful. What he had on his side was that the surveyor and agent wanted it to work too. The surveyor said his fees would be $1500. Heatley told him he would pay $2000 but not until some sections were sold. Debbie thinks their mother, who was always ready to stand behind her son, helped out with the odd bill. But putting in a road, sewerage, water and stormwater were jobs for professionals. He had to raise some money."

"In 1983 the partners had more audacious plans than major attractions. They were starting to think about floating their company on the New Zealand Stock Exchange. One of the drivers for listing was better access to capital. By now, with money coming in from both Tamaki Drive and Rainbow’s End, banks were willing to lend for the infrastructure costs associated with developments at the adventure park, but the cost of borrowing was high. If the company became public it could raise money in its own right."

"One Saturday, he dropped off his mother and drove through to Foxton. He ambled along the main street, killing time. Pausing to look in the window of a real estate agency, Rod Weir & Co., he saw an advertisement for a block of land with ‘subdivision potential’ near the local racecourse. It cost $10,000. Heatley at the time would have had about $800 if he had sold his shares and added the proceeds to his Post Office savings. He opened the door and walked in. Just as Ron Jarden had taken Heatley’s call a few years earlier, so the agent took him seriously now, even though Heatley openly admitted that he was at school and had little money. But he had time and was interested in the property so the agent drove him to look at the land, which was covered in weeds and scrub. Heatley was impressed by the size of it and could see, when the agent pointed it out, how it could be turned into a residential subdivision. He could also see how he could make money from it. This, at last, was the potential for real earnings. Driving home, he excitedly told his mother about the land and its potential. She was incredulous that he would consider anything so absurd but probably comforted herself knowing that nothing could come of it because her son could not possibly afford it. But Heatley could not let the idea go. At school and in the evenings, he considered what he would need to do to create a subdivision. He contacted a surveyor and the next time Heatley went to Levin, they met. Once again, Heatley’s easy manner, his frankness in admitting this was all new to him and his ability to see past the numerous obstacles in his way gained him a sympathetic hearing. Did the real estate agent and the surveyor, perhaps learning that his father had died, feel sorry for him? Or did they simply think that if this foolish kid was prepared to risk his deposit, they might as well take it off him? Heatley does not know but after several long discussions with the surveyor about section sizes, prices, utilities and planning rules, he felt sufficiently confident to make an offer. Heatley confessed he had nothing like the $10,000 asking price. The agent said he would accept $1000 as a deposit. Heatley went to a bank to ask for a loan and was turned down. He went back to the agent and said he could offer $200 now and the balance of the $10,000 would have to wait until some of the sections could be sold. There must have been no sign of a better offer. The agent accepted the terms and with that Heatley became the schoolboy-owner of several scrub-covered acres of undeveloped land in Foxton, with a $9800 debt that he had no way of paying unless his foray into property development, about which he had so recently known nothing, was successful."

". The relationship with Perkins became an important one for Heatley. Perkins was known and respected in Auckland business circles. Importantly, Heatley felt that even though he himself was young, Perkins took him seriously and had faith in him. Heatley thought of Perkins as a mentor. It was through Perkins, Heatley thinks, that Tapper and George’s faith in him also grew. ‘A lot of people in business can be trustworthy but I wouldn’t trust them with my life,’ Heatley observes. ‘But Bruce Perkins, Margaret George and Margaret Tapper? They are salt-of-the-earth people and I would trust them with my life. Absolutely.’ Perkins’ son, Clark, who was at Goldman Sachs until starting private equity company Mercury Capital in 2010, became Heatley’s close friend."

"A former long-term girlfriend of Heatley’s, Linda Beazley, feels his father’s death significantly influenced the way Heatley thought about wealth and security. He equated money with freedom, she says. ‘He wanted to look after Vera and his sister and I think he was strongly motivated by this drive to create wealth so that he would never again feel the material and emotional insecurity that he experienced when his father died.’"

"Within two years, all but one or two of the 11 sections were sold and his $200 investment had become $17,000 profit. Looking back, he can scarcely believe that as a schoolboy he even considered creating a subdivision, let alone that he achieved it. But at the time he did not think he was doing anything unusual because the people he was dealing with treated him seriously and were professionals. ‘But how could I have thought that was normal, or even that I could succeed? It’s crazy! Perhaps I was arrogant. I just don’t know. But it worked.’ It seems that Heatley never considered that he might fail. ‘I don’t have a creative bone in my body and I don’t think I’ve ever had much ability, but I’ve never put limitations on what I do have,’ he muses. ‘I’ve also never been afraid to call up the right person if I think they have information or something I need. That’s not to say I’m always successful. Often I am not but unless you try, you’ll never know.’"

"The entrepreneurial way is to figure out your own path.’"

"That purchase was noteworthy not only for Heatley’s age, but because it was the first example of the simple and direct way that he would go about many of his business forays in later life. He would see an opportunity, find out who knew about it, and pick up the phone to talk to them."

"For Heatley, Rainbow’s End was the third successful new business in succession but he did not pause to congratulate himself. Each success became simply more momentum propelling him towards the next venture. He has no recall of ever walking around one of the mini-golf courses with a sense of pride but only ever of thinking, how can we make this better? What else should we do? ‘I never stopped long enough. In part, the male curse in life, in my opinion, is living in the future too much. We tell our sons, “Be strong, don’t cry, you need to be the breadwinner, you’ll be the one who provides for your family,” and all that. By definition those things are about the future, so subliminally males are taught to live in the future and I was an extreme example of that. I was always thinking about the future and never taking five minutes today to say, “Well, that’s pretty good.” It took me about 45 years to work this out. I was always running towards something bigger. And that was true right through the eighties.’ As a boy depositing his paper-round money in his Post Office savings account, he had chafed at how slowly his savings were accumulating. Now, having successful small companies was also not enough. He was looking for acceleration and his timing could not have been better."

"Rainbow Corporation’s prospectus proposed the issue of 12.5 million shares. Of those, five million would be sold at 50c per share to the public, and the rest would be sold for 20c per share to the founders. Hawkins would be chairman and the five board members would be Heatley, who would also be managing director, John Sheffield, Peter Coote, Margaret George and Margaret Tapper. John Sorensen and Ken Wikeley would be principal shareholders. The prospectus records that the company had agreed to issue 625,000 options ‘to a company indirectly owned by the Managing Director Mr Craig Heatley’. The options were exercisable at 50c each at any time prior to July 1989."

"⁠By late 1983, the decision to take the company public was made. Rainbow Corporation was formed to buy the capital of Manawa Holdings Ltd, which in turn owned the separate companies running the Tamaki Drive site, Rainbow’s End and the Wet ‘n’ Wild water slides. But even with all three operations, Rainbow Corporation was tiny by the standard of publicly listed companies and it had been in operation only a short time. Studying Rainbow’s past performance could be done over a cup of tea. Nevertheless, the sharemarket was starting to move. There were 27 initial public offerings (IPOs) in 1983 and many of the new companies were doing well. Rainbow would be one of 31 local IPOs in 1984 and it would succeed beyond its founders’ most optimistic hopes.⁠"

"As far as Heatley recalls, during the construction phase he and Sheffield never had a ‘what-are-we-going-to-do-if-the-money-runs-out-before-we-finish’ conversation. Just as with the Foxton subdivision, Heatley never considered failure to be a possible outcome. ‘It sounds nuts, I know, but we just blindly went on,’ he says."

"‘He had us wound around his little finger, secretarially,’ Debbie says. He was getting used to the idea that when he explained what he wanted, people would do it."

"Looking back, Heatley considers the mini-golf course to have been one of the biggest risks of his life. It also proved the old adage that when you have nothing you risk everything, because there is so little to lose. Sheffield feels the same way. ‘We clearly didn’t have enough money to complete it so it was an extremely ill-founded venture, really. It was done on a dollar, a hope and a prayer.’"

"The entreaties of Rainbow’s lawyers prevailed. The way was clear for the listing to proceed although, ever since, Heatley has been sympathetic to those who are wrongly accused. Rainbow was small but it was also genuine and, as time proved, its growth prospects were far better than even the directors had dared to hope or the accountants had dared to forecast."

"Margaret Tapper, who had a degree in Classics, and Margaret George, a nurse, had originally wanted a profitable company of a size they could manage along with their domestic commitments. Heatley was charging ahead with optimism and enthusiasm, carrying others along with him who, as Perkins had foreseen, were being led out of their comfort zone. There were few female directors on any public companies at the time, let along two women on one board. ‘I was company secretary of Rainbow and I hardly knew what it meant,’ says Tapper."

"The threat of the float being kiboshed never became public but it caused two weeks of great anxiety behind the scenes amid furious letter-writing by both parties’ lawyers. Heatley was affronted on behalf of his friends. Although he and Sheffield were just getting established, Tapper and George’s reputations were impeccable. But the official held a powerful position and because the market already knew that the float was imminent, if Rainbow’s partners could not persuade him that the company’s forecasts were genuine, the float would have to be cancelled. If that happened, the partners’ names might forever be tainted by the association."

"Tapper recalls that it was Coote who suggested that if they brought Allan Hawkins in, his name alone would add two cents to the share price at listing. Hawkins had just launched Equiticorp and was, in Heatley’s words, ‘the golden boy of the finance scene’. Equiticorp itself was booming. Hawkins later plummeted from grace to end up in jail after Equiticorp failed, but that was in a future no one at Rainbow could then imagine. ‘We went to see him and asked if he’d be chairman if we floated,’ Heatley remembers. ‘He sort of yawned, but he must have taken a bit of shine to us because he said yes.’"

"On the day of Rainbow’s debut Heatley was managing director of the most recently listed company in New Zealand, his shares on paper were worth more than a million dollars and he was just short of his twenty-eighth birthday."

"The leisure business was providing a healthy cashflow but Heatley was already looking farther afield. While one of the main reasons for floating had been to raise money to pay back high-interest borrowings, in the back of his mind he had hoped that if the park was successful it would embolden his colleagues to consider other investments. He and the other directors knew that the leisure industry had a natural cap in a city with a relatively small population. It was hard to see what more could be wrung out of Rainbow’s End. In July 1986 the leisure side of the business was split off as Questar Corporation, which planned to look offshore for further sporting/leisure and tourism opportunities. It was majority-owned by Rainbow but listed separately on the stock exchange. An ill-fated foray into commercial property, Rainbow Properties, which developed the Majestic Centre in downtown Wellington, was also spun off from Rainbow with Ken Wikeley as managing director."

"Heatley was charging ahead with optimism and enthusiasm, carrying others along with him who were being led out of their comfort zone."

"Beazley had lived in Hawaii for a year as a teenager and after the others returned to Auckland, she and Heatley went on to Maui where Heatley stepped off the plane and fell instantly in love with the island. Despite Beazley’s sense of foreboding at the Rainbow’s End launch, the relationship seemed to be going strongly. ‘I found Craig very easy to live with on a day-to-day basis. He was a live-and-let-live person and I didn’t have to be anyone other than myself to please him,’ Beazley says. Her instinct was that, deep down, they both wanted the same things, which were, eventually, children and a strong family unit. Certainly, Heatley thought he would marry her. It never occurred to him that they would not always be together."

"Beazley had lived in Hawaii for a year as a teenager and after the others returned to Auckland, she and Heatley went on to Maui where Heatley stepped off the plane and fell instantly in love with the island. Despite Beazley’s sense of foreboding at the Rainbow’s End launch, the relationship seemed to be going strongly. ‘I found Craig very easy to live with on a day-to-day basis. He was a live-and-let-live person and I didn’t have to be anyone other than myself to please him,’ Beazley says. Her instinct was that, deep down, they both wanted the same things, which were, eventually, children and a strong family unit. Certainly, Heatley thought he would marry her. It never occurred to him that they would not always be together."

"Beazley had come from a financially successful family and the trappings of wealth were not of interest to her in the way they were to Heatley. In fact, Beazley was trying to find her own way and specifically did not want to re-create in her own relationship the roles of her parents, with her father driven by his business interests, Beazley Homes, and her mother in charge of domestic and family concerns. But with Heatley now leading a listed company and Beazley casting around for fulfilment, it was easy for them to fall into traditional gender roles. Beazley loved Heatley partly for his lack of sophistication. He liked sport—playing it and watching it. He liked eating the same food and going to the same restaurants and he loved nothing more than to be cooked for. She found him affectionate and charming and one of the things she loved about him was that he was always in control. In 1985, she moved into his house in Kohimarama."

"The naturally contemplative Heatley, now a newly minted millionaire, was wondering what life was all about. The question has occupied him over the years, though his answer has not significantly changed. ‘My answer is that life is about love, laughter, relationships, experiences, family and friends. That’s the essence of life to me and, in the most basic sense, none of those require money. I know it makes life easier and it gives you options, but the best experiences that I have had in life are experiences or moments shared with someone else.’"

"Unrelated, and many months later, Heatley took a late call at home from brokers Buddle Wilson. It transpired that somehow Brierley’s had learned that Michael Horton was booked on a flight from Auckland to Los Angeles. As soon as the plane had taken off, Brierley’s had launched a raid on Wilson & Horton shares. Horton could mount no defence because he did not even know the raid was happening. The brokers were acting on his behalf but without his knowledge. ‘Suddenly, Wilson & Horton, through Buddle Wilson, think I might be able to stave off Brierley’s,’ Heatley says. ‘Brokers are furiously trying to buy shares and they are calling and suggesting that I become a white knight but I was not interested without an agreement with Michael, which I could not have because he was on a plane.’ It was not the last time that an unfortunate turn of events for Wilson & Horton would become an opportunity for Heatley."

"After Heatley’s first call, Linton lay awake thinking about roller coasters. ‘What were the rules? There were none. I loved that. You could invent them.’ He devised his own ‘acceptability measure’ for rides on roller coasters, making up a 0–10 scale to rate the thrill factor and the re-ride factor. The search took the trio around Western Europe and Scandinavia where Heatley would talk to manufacturers about cost, Forrest would look at technical specifications and Linton would judge rides by his own instincts but also by watching the patrons, rating their responses by their expressions and their animation when he could not understand the language. He was a master mariner, commercial pilot and a cross-channel hovercraft captain, so had a good understanding of physics and engineering."

"Sometimes, the corporations created their own opportunities. Omnicorp was symbolic of the time. It was New Zealand’s largest public float when it listed in 1985, with its three major shareholders being Equiticorp and Chase Corporation, each with a 20 per cent stake, and Rainbow Corporation with 15 per cent. The remaining 45 per cent sold to the public. Its directors were Heatley, Allan Hawkins, Peter Francis and Colin Reynolds. The names of the directors and the shareholding by their respective companies were all that Omnicorp had to its name besides its issued capital of $50 million. It had no other assets and no stated raison d’être except to allow its three major shareholders to make investments they could not make individually. Although it was not said publicly at the time, the main shareholders were interested in acquiring Fletcher Challenge if they could. It never happened. But whatever its intentions, or lack of them, investors flocked and its 50c shares went straight to $1.50 on listing."

"Heatley thinks Hawkins was fixated on controlling companies in which he had an interest. ‘Why else would he want to pay a 300 per cent premium for cash? Whereas I was thinking, Where do you ever see this—you buy something for 50c and someone offers you $1.50 for it five minutes later? So I said, “Right, sold.” It not only gave us profit but all the money back that we had put in. It was a great day for us.’ A year after its listing, Omnicorp’s purposeless nature seemed more obvious and more troubling. *The Evening Post* quoted Chase Corporation’s Peter Francis as conceding that the other commitments of Omnicorp’s directors had made it difficult to find time to make investment decisions.[1](private://read/01jectdbce729daxqkxt7cbe8r/#mn5)"

"Rainbow sat tight until March 1986, when Heatley picked up *The New Zealand Herald* and saw that Rothmans had announced the sale of its New Zealand tobacco business to Rothmans Holdings Ltd of Australia for $80 million. Heatley knew that Rothmans’ New Zealand tobacco business was making $24 million a year so it did not make sense to him that the company was proposing to sell it for only $80 million. In addition, to his mind, the company was going about the sale in a Mickey Mouse way by not first seeking shareholder approval. ‘To this day I think the deal was essentially designed to screw the other shareholders in New Zealand. Anyway, that’s how I saw it. So I thought, This isn’t good, they’re trying to sell a key asset at a lower price than, in my opinion, it’s worth.’ Heatley called Rainbow’s lawyers, who advised him that Rothmans’ move was not illegal. But he was riled. It occurred to him that if Rainbow made an offer for the New Zealand tobacco business, then Rothmans Industries’ shareholders would have a legal right to know about it. That might thwart the proposed deal with Rothmans Australia."

"When Rainbow floated, there was a single sentence in the prospectus that, in hindsight, said more about the potential direction of the company than the rest of the prospectus put together. It reads: ‘The primary objectives of the Rainbow Corporation Group of Companies are to develop and operate leisure activities for the benefit of shareholders and patrons but other profitable activities will be pursued provided they are compatible with the Group’s existing operations and expertise.’ It was not so much a get-out clause as a get-in one. Rainbow had given itself permission to do anything and so long as it was making money, its shareholders were unlikely to complain."

"Just as, back at university, Heatley’s suggested business ventures had been more audacious than his friends’, so too were his ideas now. ‘Craig was ahead of his time in shares in the sense that he actually had quite grandiose views about what could happen with certain companies, and I say that in a positive manner, not a negative manner,’ says Paul Collins, who was chief executive of Brierley Investments, the highest flyer of the eighties stock market hero companies. ‘Even though at Brierley’s we were regarded as being a large corporate raider, we tended to be relatively conventional so we looked at a business and looked at its assets whereas Craig would look at the potential. His mind was quite open and expansive.’ Collins cites George Bernard Shaw’s saying that some men look at things as they are and ask ‘Why?’ while others look at what might be and ask ‘Why not?’ Heatley is one of the latter, Collins says. Heatley himself puts it differently. He had sought out staff and colleagues with complementary skills because he knew his own weaknesses. ‘I am the world’s worst administrator—the worst. If I have a strength, and I don’t know that I do, but if I do it’s probably the big picture. It’s the tectonic plates as opposed to the grains of sand.’"

"Another of Rainbow’s purchases, for a brief time, was a small stake in ⁠*The New Zealand Herald* publisher Wilson & Horton. Heatley had always been interested in the media from a consumer’s perspective and now thought he would like to be a long-term shareholder in the publishing company and get to know its chairman, Michael Horton. Heatley thought there could potentially be a good partnership. He liked publishing, liked the media and respected what Wilson & Horton had achieved. But after buying 3 per cent at a good price, no overture was forthcoming from Wilson & Horton. ‘I think Michael took the view that there was no way he was going to let me in.’ After a short time, Rainbow sold its stake and moved on to other investments.⁠"

"‘So now it gets heated. They send us a note back saying, “The deal’s done and you’re too late and we’re not interested.” Now I ⁠*know* there is something strange going on because if you were going to sell your house for $300,000 and I come along and offer you $350,000, you would take the $350,000 but they just said no. They didn’t even say, “Let’s have a meeting, let’s discuss it.” If they’d been smart they would have engaged with us but it felt to me that Bob Matthew had just taken this adversarial attitude, which seemed personal about me though I don’t know why.’ Again Heatley picked up the phone to Rainbow’s lawyers, who agreed to seek an injunction in the High Court against Rothmans’ sale of its New Zealand business to its Australian counterpart.⁠"

"‘Bob Matthew basically told me to fuck off. He said something along the lines of, “You’re wasting our time. You’ll never make any money. We don’t want you on our share register, piss off.” That was essentially the five minutes.’ Heatley was taken aback. Rainbow had no particular plans for the investment and no appetite for more than its 18 per cent. The new shareholder asked for a board seat and was turned down. Heatley had walked into a situation that he had not foreseen and he could discern no reason for the hostility. ‘But this is a male thing and I’m not particularly proud of it but when someone says, Fuck you, you kind of think, Well, fuck you, too.’ What Heatley did not know, and had no way of knowing, was that while Bob Matthew appeared to hold a significant stake in Rothmans, it had in fact been funded by BIL. Heatley knew only that Matthew was hostile."

"Again, Heatley reached for the phone. He got through to George Roberts, one of the world’s foremost names in leveraged buyouts. The pair had never met, but Heatley said he would like to fly to Roberts’ San Francisco office and sit down with him to talk about the possibility of Rainbow buying a stake in Woolworths Australia. Roberts agreed but told Heatley he could promise him only 10 minutes. He was polite but not encouraging. ‘If you want to come all this way, well, okay.’ Then he added, ‘I wouldn’t make the trip if I were you.’"

"At that time, there were many examples of the market mispricing public companies, with share prices either too low or too high to be justified by the respective company’s value. It still happens today but it was more frequent in the eighties for a number of reasons. Identifying which stocks were mispriced was key to Sir Ron Brierley’s success. He and his team picked over the data of companies, looking for a mismatch between their real value and the price of their shares. ‘That’s been Ron Brierley’s modus operandi all his life,’ says Heatley. ‘I’m not as clever as him, and I’m not an analyst but some of those mismatched prices were obvious.’"

"Rainbow sat tight until March 1986, when Heatley picked up *The New Zealand Herald* and saw that Rothmans had announced the sale of its New Zealand tobacco business to Rothmans Holdings Ltd of Australia for $80 million. Heatley knew that Rothmans’ New Zealand tobacco business was making $24 million a year so it did not make sense to him that the company was proposing to sell it for only $80 million."

"Matthew had to stand up and tell shareholders that the meeting could not go ahead. The injunction granted to Rainbow had been upheld. ‘I remember Bruce Hancox from Brierley’s coming up to me at the meeting and saying, “Craig, we want this animosity to finish. We want this fight to be over. You’ve won. We want to buy your 18 per cent and all this can go away.” So I said, “Well, there’s a price at which we’d sell.” And of course there was a price at which we would sell because, after all, we’d bought it in order to make money.’ The two companies negotiated, Brierley’s accepted Rainbow’s price and Rainbow came out of the deal with a $22 million profit. It was a lot of money and, equally important, it was a win."

"Early in 1986, Heatley had his eye on Rothmans Industries Ltd, a listed company. Although Rothmans had a big tobacco production facility in Hawke’s Bay, alarm bells were already sounding about the link between smoking and cancer, so the company was diversifying. It had acquired a large tract of land on the Coromandel Peninsula where it was developing sections for holiday homes. Heatley saw what it was doing and it seemed to him that the company was mispriced given its potential. Rainbow promptly bought 18 per cent."

"The takeover went ahead in August 1987. *Personal Investor* magazine reported that Heatley’s 32 million Rainbow shares, which had been about 25 per cent of Rainbow, became 20 million BIL shares, making him the second largest individual shareholder in BIL with 2 per cent. The largest individual shareholder was Ron Brierley himself, with 4 per cent of the company. Margaret George and Margaret Tapper did not do well out of the settlement, which gave three BIL shares for every five Rainbow shares, and four BIL shares for every five Rainbow options. ‘In the conversion to Brierley shares, something went on with the Rainbow options which diminished the value, or it should have been spread around us all,’ Tapper says. George agrees. ‘I think that’s where I ended up a bit confused and wondering what had happened.’ Everyone involved in the company had learned so much, but there was nothing they could do to save it at the end. On 23 November 1987, Rainbow Corporation was delisted from the New Zealand Stock Exchange. The Rainbow that had arced so brightly had quickly faded away."

"The young company led by Heatley, who three years earlier had been on the end of a concrete mixer making a mini-golf course, was now taking on the well-connected Establishment names and winning. ‘I got the impression that the perception of us changed a lot then and that’s when I first met the Brierley guys. I had come across them before, but that was the first time we’d really engaged with them and, in hindsight, I think it was the start of some begrudging respect from them. I felt we very much had an adversarial relationship with Brierley’s for a couple of years. It was kind of strange. I respected them and I think they had some grudging respect for us, but my strong sense was that we pissed them off because we were the little guy, they were the big guy and they thought we were coming on to their patch and they weren’t used to it.’ But Rainbow, caught up in celebrating the deal it had just done, did not give sufficient thought to the possible consequences of poking the bear. Publicly it could have been perceived that Brierley’s had not only lost money, it had lost face. Its reply would prove fatal for Rainbow."

"Despite—or perhaps because of—his years of dealing with the sector, Heatley is dubious about the value of investment advice in general. When brokers, analysts or other contacts recommend to him a particular investment, his first question is not about the investment but about the person making the recommendation. If it is such a good deal, why are they not investing themselves, he will ask himself. At any given time different brokers will have different advice about the same company. They cannot all be correct. He says he reads the advice, talks it through, then makes up his own mind."

"In her book *Brierley: The Man Behind the Corporate Legend*, author Yvonne van Dongen says BIL managing director Bruce Hancox believed that Heatley and Lane were ‘two very talented men who could well have a place in BIL. BIL also had its eye on three of Rainbow’s major investments—Woolworths, Progressive Enterprises and Kern Corporation. Although it is suspected that the value of the rest of Rainbow’s corporate assets were as ephemeral as its name, these three assets plus Heatley and Lane were considered worthy BIL takeover targets.’[4](private://read/01jectdbce729daxqkxt7cbe8r/#mn9)"

"While the corporate battle was deadly serious for Rainbow and BIL, it was entertaining to others. ‘Obviously there is little love lost between those daring Kiwi corporate raiders Craig Heatley of Rainbow Corp and BIL top banana Paul Collins,’ *The Sydney Morning Herald*’s CBD column opined on 26 March. ‘The two are locked in mortal combat over NZ retailer Progressive Enterprises, a battle which could prove costly to the loser. Collins claims that Progressive shares are worth twice as much as Rainbow shares (Rainbow is offering one share for each Progressive) while Heatley dismisses as “absolute bulldust” allegations attributed to Collins to the effect that Rainbow is about to fall in a heap.’[8](private://read/01jectdbce729daxqkxt7cbe8r/#mn13)"

"Heatley, Rainbow and other relative newbies to the investment scene were already seen as upstarts. But they were upstarts who were sometimes nimbler, who sometimes made better decisions and who often offered more money, allowing them to muscle in on territory that had only a short time before belonged exclusively to their established rivals. There was one sure way Brierley’s could prevent this happening again—it could take over Rainbow. And if it moved quickly enough, Brierley’s would also get its hands on the stake in Woolworths that it so keenly wanted. Brierley’s believed that this would also allow it to get around Australia’s takeover laws, which said that, other than an allowed creep of 3 per cent each year, any investor planning to acquire more than 20 per cent of a company had to bid for all of it. Rainbow did not seem to realise the danger it was in. It was also stretched by debt. The month after acquiring Woolworths, Rainbow placed 21 million shares worth $100 million. Heatley was quoted as saying that the placement not only improved Rainbow’s gearing ratios, but ‘it might answer some of our armchair critics’.[3](private://read/01jectdbce729daxqkxt7cbe8r/#mn8) The company had not abandoned plans for listing in Australia, he added."

"Heatley was reluctant. His instinct was not to agree, but by then Rainbow had its back to the wall. Brierley’s had more mana, its executives had more longevity and credibility with the public and its campaign against the merger with Progressive had damaged Rainbow’s image and substantially diminished its market value. Rainbow had been overstretched and Heatley had been out-manoeuvred. ‘There is no question they intimidated us,’ Heatley says, although he told *Personal Investor* magazine afterwards, ‘I must add that if the situation was reversed, then I probably would have done the same thing.’[9](private://read/01jectdbce729daxqkxt7cbe8r/#mn14) Additionally, despite being willing to defend his ground, Heatley’s preference was the personal and cordial approach. He had never liked the public fight and knew that Rainbow could not win it. In fact, the battle of public opinion had already been fought and the outcome was that Rainbow shares were now trading for just over $2, about half their value since the battle for Progressive started. In April 1987, the wrangling was brought to an end with the announcement that BIL would buy 30 per cent of Rainbow Corporation from its directors. That would take BIL’s stake in Rainbow to 32 per cent and allow BIL to effectively control Woolworths."

"‘That’s weird, but I witnessed it,’ says Heatley. ‘So there’s stuff we can’t explain and when you talk about it, it makes you sound crazy. But instinct is like intuition and I get it quite a lot and I’ve learned to follow it whether with people, or business or other things. Maybe I have a guardian angel. Maybe we are not as in control as we think we are. There are a lot of things we don’t know. I have a completely open mind to the power of the universe and how insignificant we are as individuals and how powerful the universe is.’"

"Now on BIL’s board, Heatley’s radar was still pinging, especially for big investment opportunities. Paul Collins remembers sitting in his office with Bruce Hancox before the sharemarket crash when Heatley walked in. ‘Craig said, “I think we actually need to do something bold. I think what we need to do is buy General Motors.”’ Collins was dumbstruck. ‘I know it’s available,’ he recalls Heatley adding, ‘because I’ve been talking to some investment bankers in the United States.’ At that time Brierley’s market capitalisation was somewhere between $6 billion and $8 billion, Collins recalls, and General Motors was many times larger. ‘And here he was talking about us buying a company that at that time was probably capitalised at a multiple considerably larger than BIL’s. I said, “Well, where would we even start, assuming we found the money?”’ Heatley replied, ‘We’d just all relocate over there.’ He went on to explain what they could sell and split up to make it work and concluded by saying that Brierley’s should make $50 billion out of it."

"In her book on Sir Ron Brierley, Yvonne van Dongen writes that Heatley’s suggestion of buying GM showed ‘it was obvious he was not BIL material’.[11](private://read/01jectdbce729daxqkxt7cbe8r/#mn16) Collins is kinder. ‘Craig’s thought processes had no real boundaries,’ he says. ‘He was not constrained by things the way we were. While we were huge by New Zealand standards, in a lot of ways we were very constrained and we tended to look at existing companies and not stray too far from the things that we knew, whereas Craig had not been around for that long and didn’t tend to see those boundaries. He looked at things quite differently.’"

"‘Rainbow would have completely crashed and gone like the others because it was a bubble company and the share price was totally in bubble territory and he’d paid big prices for all those stakes in the companies he had,’ Alan Gibbs says. ‘The clever thing he did was to sell out to Brierley before the crash so he must have had some presentiment of it. If he’d stayed five more minutes, he’d have been on his belly. He was lucky.’ Sir Bob Jones recalls Ken Wikeley saying to him, ‘You know, Craig has an almost animal intuition to know when to jump out of something.’"

"Heatley’s exposure to Brierley’s from the inside was causing him to re-evaluate the way the company operated. One deal in particular shocked him. Brierley’s owned 30 per cent of British life insurance company Equity & Law. By law, an investor could not buy more than 33 per cent of a British company without bidding for all of it. Heatley recalled Brierley saying that BIL would bid for Equity & Law because two other companies wanted it and he was certain one of them would bid higher. That would push up the value of the New Zealand investor’s 30 per cent stake. Heatley was torn between being impressed by the brazenness of the strategy and alarmed by its potential consequences. BIL was not bidding to buy, but bidding so that someone else would overbid and push up the total value. He thought it a dangerous ploy. What was more, these were big sums in play. Brierley’s was bidding on a scale he had not previously seen. ‘I’d never thought you’d risk NZ$1 billion thinking that you weren’t really going to buy something because you thought someone else was going to buy it. But I was just listening and thinking, Well, these guys are brilliant, they know what they’re doing.’"

"⁠Heatley walked in and said, ‘I think we actually need to do something bold. I think what we need to do is buy General Motors.’⁠"

". Eventually, hit harder than most of the world’s sharemarkets, the New Zealand market would lose 68 per cent of its value before finally bottoming out in late 1990. By then, more than 200 companies that had been listed on the stock exchange on the day of the crash were gone, and with them went investor confidence in the New Zealand sharemarket for a generation."

"The crash changed people’s perceptions of their wealth, though sometimes it took a while for them to understand the new normal. Before the crash, Grieve recalls hearing from a director of Chase Corporation who wanted to buy a boat. Instead of borrowing, the director had decided to sell some of his company shares to fund the purchase. Grieve bid him $6 a share, and the director sold 200,000 of them. A few months later, Chase shares were valued at $10 and the director said, ‘Grieve, because of you I have the most expensive boat in Auckland Harbour.’ Then the crash came and Chase was wiped out. ‘Nine months later I met the same guy at a function and I said to him, “Because of the crash you now have the cheapest boat in Auckland Harbour.”’"

"Late in 1987, racing aficionado and former New Zealand cricketer Terry Jarvis asked for a meeting with Heatley. The pair had met socially through golf and tennis but this time Jarvis had a business proposition. In Australia, he had seen that pubs and clubs were showing horse racing live, with the video feed delivered by satellite. He thought the same thing could work in New Zealand and was keen to explore it. He had got together with Brian Green, an engineer who worked in telecommunications and who was known to the Jarvis family. The pair had begun investigating how racing, which in New Zealand at that time could be followed live only by listening to the radio or attending the races in person, might be brought to screens. But the regulatory environment was hostile to broadcasting and as bad, if not worse, for anyone trying to enter the telecommunications market. Telecom had a monopoly by law on all aspects of telecommunications. Even the phones in New Zealanders’ own homes were owned by Telecom and customers rented their home phone as part of their monthly bill."

"Heatley was inside but had felt on the outer from day one. The power lay with Ron Brierley—now Sir Ron after his knighthood was announced in the 1988 New Year Honours List—Paul Collins and Bruce Hancox. Heatley was not in that inner circle so had no control. ‘Heatley and Lane were also re-rated along with their former assets, and the judgement was harsh,’ van Dongen writes. ‘They weren’t and aren’t talented’ was Sir Ron’s own brutal analysis.[1](private://read/01jectdbce729daxqkxt7cbe8r/#mn17) Something was going to have to give."

"Heatley’s brief attempt at retirement was too late to save the relationship. And after six weeks of reading books and playing golf, he was bored. Despite now living in a luxurious house in St Heliers, his first designed by Pete Bossley, and being able to buy any car he wanted, in the aftermath of Rainbow he felt flat. Making money and having any lifestyle he chose had been a dream since boyhood. It had come true, but it did not feel as good as he had imagined it would. All his life he had been striving and to suddenly stop felt strange and wrong. He still played sport but part of its pleasure had been the break from work and it was not sufficiently fulfilling by itself. He continued to watch the desultory sharemarket, dabbled in it when he saw opportunities, and lost money but nothing filled the gap. Nothing seemed how it used to be. In addition, the phone stopped ringing, which showed him that most of his callers had not been ringing because they were friends but because they wanted something. The essential element of fun, he already knew, was not money but other people. Most of his friends were working and had other commitments. They were not on tap for him."

"Largely because he had had little debt, Heatley personally came through the crash relatively unscathed, but it taught him some painful lessons. He bought Chase shares after the crash, which at 60c seemed like a bargain, but they were worthless when the company went under. That was a lesson: Do not try to catch a falling knife. Wait and pick it up off the floor if you still want it then. ‘But it’s a bit like telling kids not to touch the hotplate,’ he says. ‘They actually have to do it to learn. It’s like every male I have ever met who has wanted to own a boat. It’s like a male rite of passage that you have to go through to realise how stupid you were to ever have wanted one. But you can’t tell someone that. Friends used to say it to me too but, no, I had to go and touch the element and buy a boat myself to learn the lesson. You have to feel the pain to learn and the market was like that.’ The six to nine months after the crash were tough and, like many other investors, Heatley incurred further losses."

"In November 1987, Jarvis and Heatley were pleasantly surprised to discover that while the Sky name was being used for pay TV overseas, no one had trademarked the name in New Zealand so they registered their new company as Sky Media. In February 1989, it was changed to Sky Network Television Ltd. Jarvis and Heatley were the original investors with Heatley, who had more financial resources, gradually increasing his share as the costs mounted. Green, who had a mortgage and young family, was not a shareholding investor but nonetheless committed by ‘taking a leap in the dark’ and leaving his secure job in a small manufacturing company to join Heatley and Jarvis. He had the technical understanding they needed and says he was promised they would see him right in the future. He feels disappointed, though not bitter, that in his view those promises were never made good."

"The regulation that first confronted Heatley, Jarvis and Green was daunting. Just to try to replicate the Australian situation of showing live racing in pubs meant first penetrating a dense thicket of bureaucracy and government-mandated monopoly. Technically, putting a satellite dish in a pub car park was not difficult. Nor was leasing transponder space—there was a satellite with a transponder capable of rebroadcasting from Australia to New Zealand, which potentially allowed Australian horse racing to be shown live across the Tasman. Jarvis had already talked with Kerry Packer’s Channel Nine about getting access to its racing channel’s content. But even if you owned your own pub—owned the land, owned the buildings—and bought your own satellite dish, paid yourself to have it installed and paid for the satellite space to receive the signal and the coverage, you would still need a licence from Telecom to set up the dishes and allow the telecommunications to go ahead."

"‘Looking back, perhaps I was not only underwhelmed by the things that Craig could now purchase but I was not really cognisant of the extent of his achievements,’ she reflects. ‘He needed more recognition from me. Maybe I was envious. After all, I too wanted to make my mark on the world, but too much attention was going into supporting his dream. It became, for me, reminiscent of my own family with the driven and business-oriented father and the emotionally needy mother. Everything in Craig’s world had become about business and sport. He was thinking business and tactics twenty-four seven and I kept asking myself, What about me?’ He did not understand her fury when she discovered that a gold bracelet he gave her for a birthday had been bought by his secretary."

"But Heatley needed something new. Brierley’s had offered him the role of heading their North American operations but working in a market in which he had no contacts held no appeal for him. While they never said it, he had the sense that Brierley’s had been disappointed by his decision not to go. Maybe it would have suited them to have him out of the way, he thought. Nothing else that interested him seemed on offer. Telecommunications and broadcasting were fields about which he knew nothing but gradually, and with full disclosure to Brierley’s, he started working on the project with Jarvis and Green. By late 1988, after about a year on the BIL board, the new project was requiring all his attention and he resigned from Brierley’s. He sold all his shares in the company, making a loss on much of the stock because he had bought at $3 after the crash, thinking it was a good buy, and was selling at $2–$2.40. But as the price gradually sank to 50–60c, he was simply relieved to have got out when he did. Now he was free, cashed up and keen for a new venture."

"All his life he had been striving and to suddenly stop felt strange and wrong. He still played sport but part of its pleasure had been the break from work and it was not sufficiently fulfilling by itself. He continued to watch the desultory sharemarket, dabbled in it when he saw opportunities, and lost money but nothing filled the gap. Nothing seemed how it used to be. In addition, the phone stopped ringing, which showed him that most of his callers had not been ringing because they were friends but because they wanted something. The essential element of fun, he already knew, was not money but other people. Most of his friends were working and had other commitments. They were not on tap for him."

"He was shocked after attending his first Brierley’s board meeting to receive a copy of the minutes on one side of A4 paper saying what time the meeting had been held, the venue, who was present and what time it ended. The minutes said nothing else. Brierley’s, wary about the legal process of document discovery, played its cards close."

"Initially, the trio began investigating replicating the live horse racing that Jarvis had seen in Australia but the more they examined what was happening overseas the more they began to focus on pay TV and, at the same time, the new industry of mobile telephony. Heatley and Jarvis went to Hong Kong to talk to Hutchison Telecommunications, owned by Hong Kong’s wealthiest man, Li Ka-shing. Jarvis and Heatley were interested in how they might get into the mobile-phone industry in New Zealand but it was heavily regulated and, once again, controlled by Telecom. Hutchison was interested in pay TV, so the discussions were useful."

"There were dilemmas everywhere the novice Sky team looked. What if the government changed its mind and the frequencies were never tendered? What if they were tendered but Sky lost the bid? Or won it but had nothing to broadcast? But if they signed up pay TV rights, then lost the bid, the money they had paid for content would be wasted. Would their chances of signing up rights, and winning frequencies, be enhanced if they had a demonstrable physical base? But what if they paid for a base, then did not win the frequencies or could not obtain the rights or both? However they looked at it, there was no way of escaping significant financial risk. On top of that, apart from Jarvis’s early discussions with Kerry Packer’s Channel Nine in Australia about televised horse racing, none of them knew how to go about signing international broadcasting rights for a TV company, let alone one that was not yet on air. The one outcome they did not consider was what might happen if they set up pay TV and not enough New Zealanders were willing to pay for it to make it viable. But as David Grieve observes, Heatley has an ability to look past problems. Grieve remembers that in the post-crash environment when people were being much more cautious in their spending, Heatley paid $2 million for a property at O’Neills Avenue in Takapuna. ‘He always seemed prepared to move forward, rather than move backwards.’"

"Heatley and Jarvis were introduced to Sam Chisholm, the Kiwi then-chief executive of Kerry Packer’s Channel Nine. Sky paid around $350,000 to Chisholm and some of his people to act as consultants—effectively to broker the introductions Sky needed to set up meetings. It felt like a lot of money to pay for not much but it was the price of opening doors."

"Heatley was ropable and while he had always been in favour of the benefits of open and competitive markets, it seems likely that some of his later involvement with the fledgling ACT Party was spurred by the experience of trying to start a competitive broadcaster in an environment of state control. ‘We were immediately up against not only the worst type of bureaucracy but monopolistic, government bureaucracy using its power to screw you. It was the worst of all worlds.’ But just as Heatley was not deterred as a teenager negotiating to buy a $10,000 block of land with just $200, nor was he deterred now. If there was no way to work within the law, could the law be changed? Was there a way to go around it? He set out to thoroughly understand how the legislation and regulations worked."

"In 1988, Heatley says he suggested to Jarvis that rather than trying to get into the mobile-phone market by competing with Telecom, perhaps they should try to buy Telecom’s own mobile phone business. The industry was in its infancy and while Heatley was captivated by its possibilities, he did not get the sense that Telecom had the same enthusiasm for it. It was also going to require massive capital expenditure and to do that, an investor needed a lot of faith in the future of the industry. Heatley, a voracious follower of the media, had that faith and his instinct was that Telecom did not, or at least not to the same extent. He and Jarvis went to see Telecom to ask if the company would be interested in selling. Heatley anticipated a rebuff but, to his surprise, the company seemed to view mobile telephony as an irritant that distracted from its lines business. Slowly, he and Jarvis negotiated the outline of a deal to buy Telecom’s frequencies and mobile-phone business. Heatley could scarcely believe it. They had started out thinking about televised racing, then pay TV and here they were planning to get into the mobile-phone business as well."

"Heatley and Jarvis developed a matrix of who, around the world, owned the rights to all the products that they thought would work on the three channels they were proposing. But it was no longer a matter of Heatley simply picking up a phone and calling. This was different. Heatley and Jarvis learned that, far from their first impressions, the ‘worldwide’ media industry probably boiled down to about 20 influential people controlling most of what a company like theirs wanted. It was a global family, and one in which Heatley and Jarvis knew no one and no one knew them. They had to establish their bona fides and convince people they did not know to have faith in the future of a TV company that was not yet on air in a remote market about which many people overseas knew nothing. Beyond the existence of Television New Zealand there was, at that point, not much else to know."

"‘Linda and I had a strange week and I didn’t know why it was strange but at the end of it she said, “This relationship isn’t working for me,”’ Heatley recalls. The irony was that just when he thought he was putting an intensive work life behind him and could give her the attention she had been asking for, she was calling time. ‘She said, “You’re trying to climb Everest and you’re not going to change.” To be fair, she was probably right. I was thirty and felt as though I’d already climbed Everest, but I probably thought I now needed to go and climb the other six peaks too.’"

"He was enjoying himself now. Both the company’s wealth and his own were increasing rapidly. He was building the secure personal financial base that, as a child, he had not had. Single deals, like getting in and out of Omnicorp, were making more money than all Rainbow’s leisure activities put together. This was far easier, and more fun."

"The pay TV model was beginning to spread elsewhere in the world so there was no reason to assume that it would not work in New Zealand, although the tough topography and areas of sparse population were difficulties Sky would have to overcome somehow. But the upsides, Heatley thought, outweighed the down. There was no obvious rival for the frequencies Sky wanted. He considered that New Zealanders had been poorly served by state-owned television so would embrace a competitor. He and Jarvis looked at what was on offer by pay TV companies around the world and thought that three new channels dedicated to sport, news and movies seemed likely to be popular. The channels would be close to commercial-free and Kiwi viewers would, for the first time, get 24-hour live news, and access to movies years before they would see them, if ever, on free-to-air TV. Sport would be the real drawcard. New Zealanders could not then watch live golf, soccer, cricket, rugby league or motor racing and only a small amount of rugby and tennis. Sky would change that. Heatley was excited, and confident that New Zealand viewers would be too."

"In its negotiations, Sky tried to persuade the studios to allow it to take movies directly after their cinematic release. Sometimes studios would agree because, Heatley says, they did not like TVNZ. The New Zealand broadcaster had a take it or leave it attitude when it came to negotiating and relied on studios preferring to get some kind of return from New Zealand rather than none at all, he contends. While there was no competition, that approach worked. It might have annoyed and frustrated studios, but it was advantageous for TVNZ and for taxpayers since it meant that movies could be purchased more cheaply. He says that often studios would tell Sky that it would get a deal at reduced cost ‘just to piss off TVNZ because it had a reputation for arrogance’."

"‘There’s too many players in the market all fighting over the same bones,’ he said in a lengthy interview with *The Evening Post* the week that Rainbow acquired a 20 per cent stake in supermarket operators Progressive Enterprises after selling its stake in Rothmans.[1](private://read/01jectdbce729daxqkxt7cbe8r/#mn6) ‘The market is too high—it is inevitable it will come back. There are some crazy prices being paid. There are some dopey things happening. Some investment companies are having to buy anything to give themselves earnings, it can only work for so long.’"

"Establishing themselves was not easy or cheap. Jarvis and Heatley, sometimes together, sometimes separately, spent months on planes—flying economy class to Britain or the US, getting off the plane, attending a meeting and sometimes heading back home the same night. For more than a year the fledgling Sky negotiated with CNN and the main stumbling block was not money, although that was challenging enough, but persuading CNN that Sky would one day exist as a credible and responsible network and a worthy host of CNN coverage. Heatley is persuasive and a natural salesman, but media companies take seriously their reputations and no matter how much cash went with the deal, the New Zealanders were asking the mostly American companies they were meeting to take a leap of faith. CNN was ambitious for worldwide coverage but was hedging its bets by also talking to TVNZ. The state broadcaster wanted a news feed from CNN that would allow TVNZ to put CNN segments in its own news bulletins or to cross live to CNN reporters when required. But Sky wanted CNN exclusively, and for a good chunk of 24 hours a day. Sky was offering a few hundred thousand dollars a year but so was TVNZ, and it was asking for a lot less."

"⁠The one thing all Sky’s deals had in common were that they were tough to negotiate. That was partly because the network was not yet on air, partly because its people were new, and also because TV rights are notoriously brutally expensive. Heatley initially could not persuade CNN to do an exclusive deal. The US network accepted both offers—Sky got CNN news for the bulk of its 24-hour news channel, supplemented by the BBC, but TVNZ got the news feeds and access to CNN reporters it was after.⁠"

"Learning how they operated, Heatley became determined that Sky would stagger the lengths of its contracts to prevent the studios acting in concert when the contracts expired. They might share other information but it appeared to him that the studios did not share information about the end dates of the contracts they were signing. That allowed Sky to do a three-year deal, which was about the norm, with one studio, while another was four years, and another five. When the contracts expired, he hoped the staggered terms would make it difficult for the studios to demand a huge hike in fees in order to renew at a time when Sky would be beholden to them. The strategy worked. By the time the contracts were renewed in the nineties, Sky had credibility and more bargaining power and it could deal with each studio individually on its merits. However, getting past the danger zone proved far more protracted and precarious than Heatley and Jarvis could, at the time, predict."

"To set up towers in remote high spots was not only beyond Sky’s financial resources but the process of getting resource consents would have taken years, quite aside from the physical and financial challenges of getting power and infrastructure to the difficult-to-access sites. In that field, TVNZ subsidiary Broadcast Communications Ltd (BCL) literally held the high ground. It had the towers and access agreements already in place with landowners to allow it to reach and maintain the towers. At considerable cost, Sky partnered with BCL. In February 1989, *The New Zealand Herald* announced that Sky and TVNZ’s broadcasting services division had agreed ‘a multi-million-dollar contract’ for the state broadcaster to provide ‘a total transmission service for Sky Media’.[1](private://read/01jectdbce729daxqkxt7cbe8r/#mn18)"

"⁠When it came to movies, most of the blockbusters were made by seven studios, all based in Los Angeles. Movies have a number of revenue streams, which studios try to maximise. For most movies, the main revenue earner is the initial worldwide release in cinemas. It is there that studios get the biggest return on their investment with individual moviegoers paying a premium rate to see a single viewing of a film on its release. A movie will stay in cinemas until the audience dwindles, typically about three to six months after release. In the late eighties and early nineties, the next most lucrative revenue stream was videos, where most sales would occur in the first six to 12 months. Studios would then offer the film to pay TV for a year, and last cab off the rank would be broadcast or free-to-air TV, by which time a popular movie might be nearly three years old.⁠"

"⁠News and movies were important but for pay TV, sport was, and remains, king. With the advent of VCRs, video stores were appearing in neighbourhood shopping centres so movies could be accessed without waiting for TV channels to schedule them. For news, consumers could always buy a newspaper or turn on the radio. But the way sports rights are managed means that usually, other than attending an event itself, live sport can be seen exclusively on only one TV channel. For fans who love the immediacy of the action and who crave the sense of being present at the wins and the losses, the next best thing to being there is to watch live on TV. Particularly in New Zealand, where much of the prestigious action in international sport was likely to be happening in the northern hemisphere and in a different time zone, Heatley was sure that fans would be prepared to pay to have the live experience from the comfort and convenience of their own homes. The model was working for pay TV companies overseas and, once again, he thought there was no reason to believe it would not work in New Zealand too.⁠"

"As the impressive and expensive package of rights came together, the crucial missing element was rugby union. At the time Sky was being established, rugby was still an amateur sport, though players were increasingly dissatisfied with their conditions and arrangements. But although the agitation for reform was real, it was not yet coordinated or well directed. Heatley was aware that when the time came, Sky would have to beat TVNZ or TV3 to rugby rights. More than that, it might be that Sky itself needed to be the catalyst to start a professional competition to which it alone would have the rights. But for now, Heatley and Jarvis had a lot more to juggle, decide, sort and, worryingly, pay for."

"Heatley read about Mounter’s appointment and did what he does—he reached for the phone. TVNZ might have been staid in many ways but it had access to taxpayers’ funds, longstanding viewer loyalty, a significant incumbency status and its government ownership could, Heatley thought, potentially work for or against Sky. He was worried that with a new, savvy chief executive on board, TVNZ could use its strengths to quash his and Jarvis’s start-up. In particular, the two companies were likely to be competitors for the rights to show popular products, especially live events."

"It was not the only critical problem. The first crude business plan that Jarvis and Heatley had drawn up estimated that Sky would need $5 million in capital before it became profitable. That figure proved to be hopelessly optimistic and catastrophically wrong. By midway through 1989, when Sky had originally hoped to launch, more than $20 million had been spent or committed on rights, engineering and set-up costs and wages, and still the UHF frequencies would need to be paid for. The money was coming from Jarvis and Heatley’s personal financial resources. The urgency to begin earning subscriber income was pressing. But even if the frequencies became available and Sky’s new channels were launched, not everyone shared Heatley’s confidence that New Zealanders would be rushing to sign up. Many people, including Heatley’s own mother, were openly doubtful that the concept would work. The idea of paying for television—other than the annual licence fee which many New Zealanders already resented—was novel and not immediately appealing."

"ESPN, which produced thousands of hours of televised sport, was a key to making Sky’s sports channel work. Although ESPN’s sport was not the most compelling for a New Zealand audience—being mostly US-centric baseball, motor racing and gridiron—a dedicated sports channel soaks up a lot of material. ESPN was the biggest sports network in the United States and Sky needed ESPN’s volume. ESPN knew that too. It was in a position to drive a tough bargain, and it did. Negotiations went on for more than a year, concluding only when Sky agreed to a contract that gave ESPN a minimum of US$1.75 million per annum, paid quarterly in advance with an additional fee of 40c per subscriber per week once subscriptions reached more than 150,000. The contract was for seven years with an annual escalation clause. But the requirement that most staggered Heatley and Jarvis was that ESPN also demanded 5 per cent of their company and a seat on Sky’s board. ESPN was the single toughest company that Sky had to deal with."

"Paul Smart, Sky’s first chief financial officer, recalls Heatley ringing one day from Gibbs’s office where Heatley was trying to encourage Gibbs and Farmer to invest. ‘Hey, Smarty,’ Heatley said, ‘tell me, when does this thing break even?’ Smart was the keeper of Sky’s business plan, which was constantly being revised as the company failed to meet its own financial targets. ‘The business plan says in two years,’ Smart told him. Sky was going to work, Heatley told Gibbs and Farmer, it was going to be great, but it was taking more ingenuity, time, effort and, most of all, money to get established than he had originally thought. But if they invested and hung on, it would get there, he promised. ‘It will only take a little money and we’ll have a lot of fun,’ Heatley told Gibbs. In fact, it would take a lot more money, another eight to ten years longer than the business plan Smart had quoted, and the company would teeter far closer to the edge of the precipice than any of them anticipated before Sky began turning a profit. ‘We made good money out of it in the end, but it was probably the hairiest ride I’ve ever had,’ Gibbs reflects."

"Around the time Heatley and Jarvis were approaching Gibbs and Farmer, Heatley’s broker friend David Grieve was talking to Todd Corporation CEO John Hunn about the possibility of investing in Sky. ‘I wasn’t a broker on the deal, I was just a friend helping,’ says Grieve. ‘I didn’t take it further but Craig did, and Todds ended up taking a stake. That’s where Craig was absolutely brilliant. He could go and see them and convince them to live part of the dream and I think it’s been a very rewarding investment for them.’ Todd Corp was a good choice for Sky. The company had been closely watching the deregulation occurring in many industries at the time. It had been instrumental in establishing new Telecom rival Clear Communications and had already taken an in-depth look at the possibility of partnering with an American company to bring cable TV to New Zealand. The cost of putting in cabling made the idea uneconomic. However, the company’s research meant that when Heatley made his approach, Todd Corp was already interested in the industry, had a good understanding of it and could see that Sky’s proposed terrestrial service was the right strategy. In September, four months after the network’s launch, Todd took a 15 per cent stake."

"In 1990, the government had sold Telecom to two US telecom giants, Ameritech of Chicago and Bell Atlantic of Philadelphia, and to the New Zealand firms Freightways (owned by Gibbs and Farmer) and Fay, Richwhite (the investment bank owned by businessmen Michael Fay and David Richwhite) for $4.25 billion. Freightways and Fay, Richwhite had brokered the deal and Gibbs, who was on Telecom’s board, chaired the board committee that ran the company. Through this, Gibbs had come to know the Americans well and was used to dealing with them. He offered to talk to them about whether they might be interested in Sky. It turned out that they might."

"With a staff of 200, all being paid out of shareholders’ funds and bank loans, Sky finally went to air on 18 May 1990. Initially, only Auckland could receive the new service though by August, Waikato and Tauranga households could get it too, and by the end of the year it was available in most of the North Island. For Heatley the launch meant relief rather than euphoria. He, Jarvis and Green had achieved a huge amount. They had done what they had set out to do. They had built a TV network from scratch offering international channels and up-to-date choices that New Zealanders had never before had, but pre-launch subscriber sales had not matched predictions and the drain on shareholder funds was unabated. By the time of the launch Heatley’s shareholding was about 40 per cent of the company and Jarvis’s was 14 per cent, reflecting how much of his own money Heatley had had to put in. TVNZ had about 25 per cent, Gibbs and Farmer’s investment company Tappenden had about 18 per cent and ESPN’s shareholding had been diluted to 1 per cent."

"At the time, Robert Bryden was managing director of Todd Capital, the family-owned corporation’s investment arm. ‘Like Craig, we always thought that long term Sky would make money but the performance of the business was not as good as the business plan that he had provided us,’ Bryden recalls. ‘There’s no question that the take-up of subscriptions was not as fast as Craig had projected when he did the sales pitch to the investors. It was slower growth in terms of subscriber numbers and cashflow in those early years than had been forecast. There was a bit of angst, no question about that. We were not concerned about the actual industry or where it was heading, but we were concerned about the operations.’"

"Alan Gibbs thinks that his first conversation with Heatley about buying into Sky might have occurred when they bumped into each other on a plane. Sky did not fit Gibbs’s investment strategy. With the notable exception of the amphibious Aquada vehicles that Gibbs is developing, ‘and on which I’ve lost more money than Craig’s ever spent’, Gibbs’s business strategy has been to take over other people’s companies. Also, where possible, he tries not to invest his own money. ‘I basically never put money into anything. I make people give it to me,’ he says. But this time Gibbs and his business partner Trevor Farmer did put money in. They liked Heatley and he was persuasive."

"By now Heatley was very anxious. Even with TVNZ as a shareholder, the company was costing him and Jarvis far more than they had expected and Heatley was increasingly carrying more of the financial burden. They needed to find another investor. The attempt to bring in Kerry Packer had been a dismal though memorable failure, leaving them with nothing more than a good dinner-party story. It was time for Heatley to try tapping his own business contacts."

"By early 1992, with Sky’s subscriber numbers grinding upwards but not reaching forecasts, revenue consistently lower than expected, the company in debt and its shareholders still having to put in more money, Sky was desperate for some wins. Heatley was convinced that rugby was the answer. On 11 March 1992, his eye was caught by a short Australian Associated Press report from London in that day’s *New Zealand Herald*. Just three paragraphs long, the article said that the Cricket World Cup, which was at the time being hosted by Australia and New Zealand, and in which the England team was a favourite, was leading to bumper sales of satellite dishes in Britain. ‘The form of [England batsman] Graham Gooch and the England team have sparked tremendous interest in the cricket extravaganza, shown exclusively on satellite television station British Sky Broadcasting,’ the article said. ‘According to the latest figures by the *Financial Times* satellite monitor, sales of new dishes were 78,000 last month, up from 41,000 for the same period last year.’[4](private://read/01jectdbce729daxqkxt7cbe8r/#mn27) This was exactly the evidence Heatley was looking for. He immediately fired a copy of it off to Nate Smith. ‘Nate, if the powers that be in America want any more evidence of what we need to do here, send them this,’ he wrote, attaching a copy of the AAP story.[5](private://read/01jectdbce729daxqkxt7cbe8r/#mn28) If Sky could get exclusive rights to the All Blacks tour of Australia and South Africa it could attract another 20,000 to 30,000 subscribers at least, he added, seemingly making up numbers in his enthusiasm."

"One Sunday night, the day before a board meeting, Heatley’s phone rang at home. It was Gibbs. ‘Craig? Alan here. You told me we were going to put a little bit of money in this TV company of yours, and that we were going to have a lot of fun. Well, bugger me, we’re putting a lot of money in this TV company of yours and it’s no fucking fun at all.’ Gibbs was angry—not at Heatley personally but at the situation. This was not what Heatley had promised. Heatley was embarrassed. He was trying hard but subscriber numbers were not rising fast enough. In theory Sky should have been a success. In practice it was not."

"By early 1992, with Sky’s subscriber numbers grinding upwards but not reaching forecasts, revenue consistently lower than expected, the company in debt and its shareholders still having to put in more money, Sky was desperate for some wins. Heatley was convinced that rugby was the answer. On 11 March 1992, his eye was caught by a short Australian Associated Press report from London in that day’s *New Zealand Herald*. Just three paragraphs long, the article said that the Cricket World Cup, which was at the time being hosted by Australia and New Zealand, and in which the England team was a favourite, was leading to bumper sales of satellite dishes in Britain. ‘The form of [England batsman] Graham Gooch and the England team have sparked tremendous interest in the cricket extravaganza, shown exclusively on satellite television station British Sky Broadcasting,’ the article said. ‘According to the latest figures by the *Financial Times* satellite monitor, sales of new dishes were 78,000 last month, up from 41,000 for the same period last year.’[4](private://read/01jectdbce729daxqkxt7cbe8r/#mn27) This was exactly the evidence Heatley was looking for. He immediately fired a copy of it off to Nate Smith. ‘Nate, if the powers that be in America want any more evidence of what we need to do here, send them this,’ he wrote, attaching a copy of the AAP story.[5](private://read/01jectdbce729daxqkxt7cbe8r/#mn28) If Sky could get exclusive rights to the All Blacks tour of Australia and South Africa it could attract another 20,000 to 30,000 subscribers at least, he added, seemingly making up numbers in his enthusiasm."

"But for a time, all the ingenuity made no difference to the company’s struggle. A year after its launch, Sky had just 18,000 subscribers when the company had expected more like 100,000. For a period in early 1991, Sky was losing $1 million a week. Smart recalls some months where he would sit down with others to decide whether they should use the available cash to pay wages or the previous month’s PAYE, because there was insufficient money to do both. Board meetings were spent discussing loans and how much the shareholders—Heatley, Jarvis, TVNZ, Tappenden and Todd—would put in on a pro-rata basis and whether more could be raised from the banks. Gibbs and Farmer were particularly irritated. More money was required every week."

"Smart’s quick synopsis is that the company started with Jarvis and Heatley as shareholders, spent all their money, brought in TVNZ and spent its money, brought in Gibbs and Farmer and spent their money, then did the same with Todd Corp. The cash burn rate was high. Smart’s forecasts were tracking how quickly Sky would run out of money—one month, two months, three months. Heatley did not always want to know. ‘I remember once saying to him, “Jesus, Craig, you make me feel like I’m responsible for Sky running out of money,” and he looked at me and said, “Good,” and walked out of my office.’ There was occasional professional tension around how to keep Sky going with limited funds without breaking any laws or breaching any accounting standards. ‘We never went over the line but we did occasionally skate along it,’ Smart says. ‘I’d characterise it by saying that in a start-up where you are constantly running out of money, you are challenged to use every means at your disposal to fund the company.’ He sees Heatley as driven and complex, hard to like but someone who commands respect. ‘He started a business from nothing, gave us all jobs, created all that and it wasn’t easy. He might be New Zealand royalty now, but he wasn’t always.’"

"‘Craig sees things over the horizon that other people do not see,’ Bryden says. ‘He also has a powerful personality and is an outstanding salesman, which is reflected in the fact that he managed to achieve the Sky start-up. He had all the building blocks in place, but it was operationally that it was hard.’ Todd Corp was still confident their investment would pay off if the risks could be managed properly. Nevertheless, as the months of struggle went on, Bryden faced difficult questions from his own board about Sky’s performance. ‘There were quite a few conversations that went, “When are you going to make things come right, because you’re not performing to the business plan.” But the reality is that start-up businesses are tough, and because of the lack of operating experience it was all learning from doing and trying to follow what other people had done overseas.’"

"From its first day on air in mid-1990 and into 1991, the company struggled. At one point, Sky ran a door-to-door campaign where a Sky representative would offer a decoder for free, which they would personally hook up then and there, plus a free subscription for three months. If at the end of that time the household liked the service, they could keep the decoder and pay weekly thereafter. The strategy, like many of Sky’s other marketing ploys, temporarily boosted subscribers but there were also a large number of households who rejected the offer outright or returned the box after the three months. The rate of subscribers dropping out was high and trying to combat churn was a constant headache."

"Once, when Sky needed to build its installation capacity but had no money to pay for vans to access the sites, Heatley did a contra deal with Toyota New Zealand CEO Bob Field where Toyota gave Sky 25 vans in exchange for advertising airtime. ‘Soon after, when I was looking around to see where we could get money because we were running out again, I went to Hertz New Zealand and asked if they would like to buy all our vans for $500,000, and we would lease them back for five years,’ Smart says. They agreed and Sky got the cash it needed to keep running for another few weeks. Smart recalls that when Field found out that Sky had sold the vans he was furious, but he had no comeback because Toyota had taken no security over them. ‘I probably got a few pats on the back at Sky that day, but I could not have done what I did if Craig had not first done the deal with Toyota.’"

"Gibbs and Heatley brought together representatives of the two biggest American media companies of the time, Time Warner of New York and Tele-Communications (TCI) of Denver, with two of the US’s biggest telecoms companies, Bell Atlantic and Ameritech, and began negotiating with them to buy into Sky. Initially, Gibbs and Heatley suggested they acquire 40 per cent of Sky, but the Americans were adamant it would be 51 per cent or nothing."

"Heatley recollects that TVNZ and Todd Corp said they would put more money in, but in exchange they would require a share dilution of 1:3. In other words, for every share TVNZ and Todd had, they now wanted three. These terms reflected the company’s poor performance against the business plan that Heatley had promoted and, related to that, the company’s risk of failure now being greater than the investors had believed it to be when they signed up. Heatley was aghast at the dilution prospect. He had thought that he and the shareholders were close, but this was the difference between business and friendship. ‘I thought, Oh shit, would they really do that?’ There was no way he would agree to the proposal, but he understood why they were suggesting it. Before TVNZ had become a shareholder, Mounter had warned Heatley that Sky had underestimated the running costs and underestimated how much capital the business would need. Mounter had been right, Heatley had been wrong and the business was now at crisis point."

"On Sky’s side, Heatley led the negotiations with lawyer Roger Craddock, and on the HKP side there seemed to be a small army. When things were tough, Heatley and Craddock would call in Gibbs to play the bad cop to Heatley’s good cop. ‘The two telecom companies plus the two TV companies would come to Hawaii with 12 people each, which is ridiculous,’ Gibbs recalls. ‘They would come with 50 people.’"

"So Gibbs had left Telecom by May 1999. Ironically, soon afterwards Craig Heatley and the others on the Sky board went cold on their proposed acquisition of ihug, which had been the actual trigger for Gibbs’ departure from the Telecom board. Sky, meantime, had been an excellent investment for Gibbs and Farmer. The US grouping of Ameritech, Bell Atlantic, Time Warner and TCI, which Gibbs had helped to bring in as 50 per cent shareholders in 1991, had provided the company with the additional capital it needed to get established with two excellent executives in Nate Smith and John Fellet. But the American partnership was inherently unstable because of the rivalry between its constituent companies. In August 1997 Heatley engineered the sale of the Americans’ stake in Sky to Independent Newspapers Limited (INL), a New Zealand newspaper company that was controlled by Rupert Murdoch’s News Corporation.[15](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477355-616451090-15) Then a few months later, in November 1997, Sky had its initial public offering."

"But if that wasn’t enough, 1990 had also brought Gibbs another wonderful business opportunity. Earlier in the year he’d taken a call from Craig Heatley inviting him and Trevor Farmer to invest in Sky Television, his latest business venture. Heatley, 34, had been one of the stars of the 1980s, having started out with a mini-golf course on Tamaki Drive. By 1987 his public company, Rainbow Corp, controlled 55 per cent of New Zealand’s supermarket trade through Progressive Enterprises, 20 per cent of Woolworths in Australia and significant property investments. Cannily he’d sold the business to Brierleys a few months before the stock market crash of October 1987.[28](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477273-050103421-28) Casting about for something to do in 1988, he started talking to someone who had a horse racing television channel in Australia called Sky. At that time, he was on Brierley’s board and they owned Dominion Breweries. He came up with the idea of having a horse racing channel exclusively in DB pubs. When his Brierley colleagues passed on the opportunity, he followed it up personally."

"Heatley, who lights scented candles in every room when he is at home and has a weekly standing order for large bouquets of fresh flowers, says he would be the last person to tell others to forego frivolities in order to save. However, he says, people should be conscious of the hidden cost of their frivolous consumption. The hidden cost is the interest that would have accrued had the money been saved instead of spent. For example, he says, you could shout your family a holiday to Fiji, have a good time and spend $20,000. ‘Great. But if you instead invested the $20,000 at five per cent per annum after tax, twenty years later you’d have $53,000. I’m not saying that people should not go on holidays, but people should know about the hidden cost of their spending. Then again, you could be Scrooge McDuck, never do anything, end up wealthy and then die. That would be stupid.’"

"Despite his high-profile pro-am successes, among golfers it is Heatley’s membership of Augusta that creates his profile and, in particular, his role as chair of Augusta’s media committee. The timing of his invitation to join Augusta was good for him and, arguably, for the club too. He had by then stepped back from Sky and was ready to devote time and effort to a new project. Although his radar was perpetually pinging in the search for interesting investments, he had no desire to emulate the enormous commitment that Sky had demanded. Other than family commitments, he was free to immerse himself in Augusta. With his background on the other side of the TV rights which are so vital for Augusta’s revenue, and his passion for the club, he was an ideal candidate for a position on the club’s board and chairmanship of its media committee."

"He cautions against investors having such faith in their own judgement that they hang on for too long to investments that are losers including, sometimes, their own companies. A successful friend of Heatley’s dumps any investment that has dropped in value by 10 per cent. ‘He rides his winners and cuts his losses and that is much easier to say than to do. Generally, people tend to think they are right, and one of the biggest mistakes people make is that they hold losing hands for too long. Once you’re emotionally invested, it’s tough to make rational decisions. Always be prepared to admit that you might have been wrong.’"

"‘Like so many entrepreneurs, Craig is a gambler,’ Deaker says. ‘He puts on an act of always being in control of situations. Sometimes he genuinely is in control because he has spent a great deal of time in preparation. That press conference was one of those occasions. He was going into something that potentially could turn nasty. He knew the danger and as chairman of the media committee, he was stuck with that press conference, but when I say stuck with it I suspect very strongly that it reveals another element of his character, which is that he was dying to be doing it. He knew it was a gamble but he also knew that if he prepared properly, it would work well.’"

"‘It took Mike’s death and that moment on the plane for me to realise that the most valuable thing that each of us has is not money, is not cars, is not assets—it’s time. But none of us knows how much of it we have. None of us knows what will happen tomorrow and given the most valuable thing we have is time, then how we use it is important and, to me, the most important thing in my life is my family.’"

"Heatley is strong on the importance of simple etiquette—looking someone in the eye when shaking their hand, for example, and using their Christian name and making conversation. If a checkout operator at the local supermarket has a name tag, Heatley will greet them by name. ‘You see their face light up. And that’s natural because what is the single most important word in the world, in every language? It’s your own name.’ He thinks too many young people do not know the importance of basic courtesies. First Tee was an opportunity to try to impart elementary social skills. It could start with kids who were scared of the world and by the end of the programme they could stand up and make a speech in front of 40 people. So he launched First Tee and spent more than a million dollars, opening ‘learning centres’, raising money from golf days and garnering support, but the programme never picked up the momentum in New Zealand that it has in the US. Heatley had hoped that it might be embraced by schools, but it was not. First Tee, John Hart says, showed Heatley in a different and philanthropic light. ‘He wasn’t looking for public acclaim—people would not even know that Craig was the face of it but he drove it, he put his own money into it, he spent a lot of time on it and it’s a tremendous programme that, through golf, teaches young people the values of life. He must be deeply disappointed that it’s fallen over.’"

"He is approached regularly by people seeking donations and while he has given generously to some, it has been on a case-by-case basis. He is a supporter of Auckland City Mission because his family are Aucklanders and he likes the mission’s work with the city’s most disadvantaged. But he accepts that his children may prefer different causes when they inherit. Heatley’s name is not associated with philanthropy and his most notable attempt at it, establishing the First Tee programme in New Zealand in 2005 to use the teaching of golf to help underprivileged children, never generated sufficient impetus to become self-sustaining. Its demise disappoints him because he says the programme, which originated in the US and is supported by the golf establishment there, uses the best attributes of golf, including honesty and perseverance, to teach life skills."

"He thinks New Zealanders’ aversion to the sharemarket goes back to the 1987 crash, which was for New Zealand like the global financial crisis of 2008–09 was for the US and Europe. ‘The GFC brought America and Europe to their knees whereas in New Zealand, partly because of good economic management by the government at the time and partly because we had already made structural changes to our economy after the ’87 crash, we fared better than most.’ For New Zealanders, he thinks the psychological effect of the crash was so severe that it reminded him of people in the post-war era who were so traumatised by what they had been through that they vowed to never buy a Japanese-made camera or car. ‘I think there are people who were so badly affected by the crash that they vowed never again to invest in shares. Thirty years later the psychological effects are still there, though a new generation who did not personally suffer might now be more open to the idea.’"

"It was his interest in Act and its policy development which led Heatley in the early 1990s to visit the low-decile Tangaroa College in South Auckland. In that single visit, he learned a great deal that amazed and dismayed him including that on any given day the truancy rate was 20 per cent and, on top of that, some of the pupils were malnourished. Then there was the secondary qualification system at the time. While visiting the school he says he learned that University Entrance grades were allocated to schools each year based on the student cohort’s results in School Certificate the previous year. ‘Let me get this straight,’ he asked, ‘how many As can you give out this year?’ He says the answer was none. He was appalled to think that a modern-day Einstein could have been attending Tangaroa College but might not have been awarded an A because the school had none to give. At the same time, some teachers were concerned that UE accreditation carried a risk of unfairness if teachers, for whatever reason, passed students who were undeserving. ‘This was the dumb, dopey system we had and I believed it was nuts.’ His visit was also before the Education Review Office published assessments of schools and he thought it ridiculous that schools were not incentivised to perform better by having their results published. Fired up, he made an appointment to see the then Education Minister Lockwood Smith. After he had had his say, he says Smith replied, ‘Craig, there is one union and only one union that can bring a government down in New Zealand and it’s the teachers’ union. What you are saying makes eminent sense but we will not be doing it. We are not willing to take on the teachers’ union because right now it’s a fight we are not wanting to have.’"

"Across on the mainland lies another of Heatley’s ventures—Ōmarino—described by Sotheby’s International Realty as ‘one of the world’s last perfect paradises’ and by Heatley as a labour of love. Ōmarino, with its seven north-facing bays, was once an 809-hectare farm. It was bought in 1961 by an American, John Bentzen, who saw an ad for it in *The Wall Street Journal* and did not realise there was no road access. But on flying in, he fell in love with the property and bought it. Decades later, Heatley, also with a home in the Bay of Islands, got to know him and in time they entered into some investments together. Around 2001 Bentzen, then aged in his nineties, decided to sell the farm. He wanted $20 million for it. While the price was astronomical Heatley, who bought it with a small group of friends including Trevor Farmer, says he loved the property and did not even negotiate. The new owners initially intended splitting it among themselves but over time, as most of the others gradually dropped out, Heatley bought their shares and now his family trust owns 80 per cent and another family owns the remainder."

"rol the situation.’ ‘It’s my pleasure to welcome everyone to Augusta National Golf Club and to the 2010 Masters Tournament,’ Heatley began the press conference. ‘I would also like to welcome Tiger Woods, our four-time Masters Champion. This is Tiger’s sixteenth Masters Tournament. Tiger, we are delighted to have you here with us, and what a beautiful day out there to start Masters week. Are there any comments that you would like to make before we invite questions from the floor?’ Yes, Tiger did have some comments. He was pleased to be back, he said. The galleries had been encouraging and he was touched by that. And he wanted to apologise to his fellow players ‘for having to endure what they have had to endure the past few months’. The questions began with Heatley selecting the reporters either by name or pointing when they were journalists he did not personally know. Woods was well prepared and articulate, coming across as sincere and contrite and appearing to give full answers even when he was not actually doing so. He took every question asked of him without demurring and was frank enough that he probably met the expectations of his TV audience, although not sufficiently frank for the liking of some of the media. The press conference came to an end and the media rushed out to write their stories and make their comments. It had gone as well as Heatley could have hoped, even though the media’s demand for Woods was insatiable."

"There is a final factor in his thinking about investing which neither he nor anyone else can do much about. It is the significant part played by luck. Good luck has made some investors rich, and bad luck has broken others. Heatley says he is living proof of the maxim ‘It’s better to be lucky than smart.’ His own first lucky break, he reckons, was that spell of good weather in Easter 1980 when he and John Sheffield opened Lilliputt in Taupō. Heatley was lucky again that overseas investment in the media had just been permitted, enabling Alan Gibbs to approach the Americans to invest in Sky, in 1991. It was third time lucky when rugby union turned professional in 1995, when Sky was in a better position than its competitors to sign up the live broadcast rights."

"His eldest and youngest children, Ben and Josh, share Heatley’s interest in finance and investment. However, there is potential difficulty for children following the same career path as a successful parent. Perhaps, being the eldest, the risk of living in his father’s shadow weighs most on Ben. For as long as he can remember, Ben has been interested in the commercial world but is conscious that at 27 his father was already floating Rainbow Corporation. ‘It sometimes makes me feel as though I’ve achieved very little by comparison,’ says Ben, who is gradually becoming more involved in managing some of the family’s investments. ‘Dad comes across very confidently in a business environment. He has everything under control and is impressive to watch. But from my observations, success in the business world can sometimes be a result of a deep insecurity or a sense of not being good enough. Business becomes the channel through which some people choose to prove their worth. So, on the face of it, yes, he is confident and we kids are too, but we’ve still got our fair share of insecurities.’"

"‘Overall it was a masterclass in evasion and avoidance, of speaking without saying much, of being elliptical, of answering questions but often not the questions he was asked,’ wrote John Hopkins in *The Times* the following day.[5](private://read/01jectdbce729daxqkxt7cbe8r/#mn56) He credited Woods, and indirectly Heatley as host, for not censoring the questions. While Hopkins said he would have liked the press conference to have run for longer, Woods had answered nearly 50 questions and looked each journalist in the eye as he did so. Still, Hopkins was sceptical about Woods’ responses. ‘Did he really convince us that he was genuine in his contrition? Not really. Did he address the key issues? Not really…It is not too much to suspect that after Woods had left the room he clenched his right fist and pumped the air. He had talked without saying very much…He ducked, he weaved, he blocked. Tiger Woods had pulled off another miracle shot.’"

"Back on the island, Heatley has brought his son Josh and some of Josh’s friends up from Auckland. They head off to play pool, though if Josh was with only his father, they would most likely first play chess. No chance for a competition slides by the pair. If they swim in the surf, they compete to see who can bodysurf furthest up the beach. They are keen on poker. In their Auckland house, at Maui and here on Moturua, chessboards are always set. Josh maintains in his head a lifetime tally of thousands of chess games with his father. The wins are, for now, slightly in his father’s favour. Cut-throat competition is the norm between Heatley and his sons. The Takapuna house where the children grew up had a tennis court adjoining the neighbour’s property. Ben, the eldest of the four children, recalls his brothers, his father and him playing tennis. ‘And, hell, those poor people next door! The moment we’re on the tennis court it’s all on, all of us yelling and all of us arguing because each of us wants to win.’ More often than not, the matches would end with two people not talking to each other. ‘But the next day, we’d put it behind us and do it over again.’ His sister is competitive too, he says, but displays it differently."

"At no time after or before those successes did Heatley ever consider that his calling was to be a professional golfer. He wants to win every competition, match or game he plays, no matter what it is, but that is not why he plays. His primary motivations are recreation, companionship and fitness. ‘He’s done extremely well at golf, with a terrible grip,’ says Monty Moynihan, who first met Heatley the day Heatley turned up as a 14-year-old at Manor Park. The pair have remained in contact ever since. ‘Craig has talent and still plays a very good game of golf. And he competes. You play him for $5 and it’s like it’s his last. You feel like reminding him that it’s not going to hurt him if he loses but for him that’s not the point. He’s there to win.’"

"At the time he was on seven different boards and in one day he resigned from all of them, including Sky, and pledged that only in exceptional circumstances would he ever sit on another. It had been flattering to be invited on to boards but he had not always felt like he contributed and the commitment was time-consuming."

"In his office, he went through his correspondence with his temp. Nothing. Heatley ventured, ‘So, no letter from any golf clubs, then?’ ‘Oh, yes,’ she replied. ‘There was one. But you get lots of them so I stuck it in the miscellaneous file.’ She reached for a file crammed with unaddressed circulars and fliers from Tyre Warehouse and local supermarkets. From among them she fished out an envelope from Augusta National Golf Club. ‘Here it is.’ Heatley took the envelope into his office so he could open it in private. It was a gracious letter inviting him to become a member. He sat alone, reading and re-reading it. He still has it. It asked him to sign an acceptance form, remit a cheque and return it promptly. It was dated weeks earlier. He quickly wrote out a cheque, went to the post office, bought more stamps than were necessary, stuck them all on the envelope and put it in the post box. This time there would be no mistakes."

"One day in 2003, Heatley was at the National Golf Club on Long Island. This quintessential old boys’ club has a tradition where members and their guests play 18 holes in the morning, then shower, dress in a suit and tie or jacket and tie, and dine in the ornate dining room where white-gloved waiters serve lunch from large silver platters. Heatley had just showered and was getting dressed when an attendant approached to tell him he had an urgent phone call from a friend, someone who, like Heatley, was a shareholder in the Pebble Beach Golf Links in California. Concerned the call might be about the health of a mutual friend, Heatley hurried to the phone. The call was not about anyone’s health. It was to tell Heatley that he was being invited to become a member of Augusta. Heatley had thought many times that he had a guardian angel but was this not, finally, proof? As he put down the phone he could not say that this was a dream come true because it was nothing he had ever dared dream. Augusta had never had a member from New Zealand. Membership was an entrée to an elite, handpicked, global business roundtable. He felt overwhelmed that an invitation was being extended to him."

"It was an invitation to Kauri Cliffs that played a role in Heatley receiving a phone call that still makes his skin prickle when he recalls it. But there was no sense that that particular weekend would turn out to be significant in any way. The Robertsons had friends coming from the US and invited the Heatleys to come and stay too, and to play golf. Heatley was partnered with Robertson’s friend, who was older and seemed to struggle with the length of shots required off the back tees. Heatley suggested that his American partner instead play off the middle tees. Heatley thought nothing of making the offer—after all, it was just a pleasant day out. But it appears that his golfing partner was significantly touched by Heatley’s sporting gesture. The pair had already struck up a warm relationship over dinner the previous night. Unbeknownst to Heatley, Robertson’s friend was a member of Augusta. On Maui, Heatley had also become friends with another Augusta member, who had invited Heatley to bring two friends to Georgia to play as the member’s guests. Heatley had never expected a second opportunity to play Augusta, and was again so entranced by the club that this time he took a piece of letterhead and a matchbook home as souvenirs."

"A few years after his Augusta debut, Heatley saw in the news that American hedge-fund billionaire Julian Robertson had bought an expensive piece of land in Northland not far from where Heatley himself had a beach house. Heatley wrote to him, welcoming him to New Zealand and offering local knowledge if that might ever be helpful. Robertson sent a charming response and Heatley says he considers it ironic that having initially written to offer to be helpful, he has learned far more from Robertson than Robertson has ever learned from him. The tables were turned, Heatley says, because Robertson, who was knighted by the New Zealand government in 2010, ‘is charming, a conversationalist, a philanthropist, and a genius investor to boot’. The pair and their wives became friends and in time the Heatleys were guests at Kauri Cliffs, the private golf course that Robertson built at Matauri Bay, Northland, in 2001."

"There was no natural connection to the US for New Zealanders until Sky bridged the gap, Tataurangi thinks. His mother was a keen follower of sports and subscribed to Sky. ‘Sky opened my eyes to the PGA Tour,’ he says. He would watch professional golfers play in places like Cincinnati, then he would go and look up Cincinnati to find where it was and to learn more about the course. He says Sky lit the fire for him to go to America, which he did in 1994 when, aged 22, he was the youngest golfer on the tour. The most useful preparation he had, apart from practice, was having watched Sky. Consequently, when Heatley asked him if he would like to play the 2003 AT&T with him, Tataurangi had no hesitation in accepting. ‘Up to that point I was just aware of who Craig was and what he did and that he was a keen golfer, a friend of the game, knowledgeable and he always had a great yarn to tell, which as a young, impressionable person you always remember,’ Tataurangi says. A golf championship—with hours spent together each day through all the hopes and disappointments of a competition—is a fast way to learn someone’s character."

"In 2013, apparently without demurral, Heatley was back on the Rich List with *The National Business Review* estimating his fortune at $330 million. ‘The Rich List is notoriously incorrect,’ he says. While his marital status changed, his resolution not to return to an unrelenting corporate life held. That did not mean that investment ideas were not always bubbling or that his investment radar stopped ceaselessly scanning for opportunities, but his children had become, and remain, the central focus of his life."

"Because he stepped down from board roles, and has had a lower public profile since leaving Sky, Heatley says people think he now plays golf every day, which is not true. But these days his investments are more private than public and, in particular, he has been significantly involved in trading foreign exchange. The field gives him the opportunity to use his keen and long-standing interest in politics and current affairs to anticipate currency movements. He trades almost exclusively in New Zealand dollars, Australian dollars, British pounds, American dollars and Euros, turning over billions of dollars ‘with a fair modicum of success’. He was, for some years, New Zealand’s biggest individual foreign-exchange trader outside institutions like banks or companies like Fonterra. He is much better at trading currencies than equities, he says. ‘If I’m honest, my public-equity investment performance over about 20 years has been average at best.’ But in the notoriously fickle world of foreign-exchange dealing, Heatley would give himself an A minus. He also dabbles in private equity, which he says is not for the faint-hearted. While many people consider currency trading to be highly speculative and akin to gambling, he does not, though he cautions it is not an investment for the inexperienced."

"On signing, Heatley decided to verbally ask for something additional—a favour rather than a condition and personal not business. If he signed the deal, might ESPN somehow arrange for him to play a round at Augusta National Golf Club? He says he was ‘kind of joking but kind of not joking’ when he asked. He thought that if anyone had the contacts to pull it off it would be ESPN, whose people he now knew well and liked. He was certainly not going to approach the club directly even though by then he had been to Augusta three times to watch the Masters—a small perk of Sky’s contract with the prestigious golf club. He did not have the right contacts and, anyway, by reputation Augusta was one of those clubs where if you asked to join you would never become a member. Perhaps, similarly, if you asked to play you would never get the chance. But asking ESPN was different. ESPN was hugely influential, he was a client and even if he was rebuffed it was worth trying because if he never tried, it would certainly never happen."

"Arriving with a first-class ticket at Atlanta airport, Heatley was told there would be a slightly unusual boarding procedure. He was to wait in a lounge and in due course would be escorted to the plane. He did as instructed, waiting alone in the lounge until a staff member led him to his seat in the first-class cabin, which was large but empty. Shortly before the plane was due to depart, an entourage arrived. At its centre, surrounded by a phalanx of staff and Secret Service personnel, was former US President George Bush Snr and his wife, Barbara. Heatley realised that Bush Snr would also be heading for the Presidents Cup. Heatley had with him a book on the history of Augusta that a member had just given him. He wrote a note introducing himself and asking if the former president might be so kind as to sign the book. Heatley gave the book and the note to a flight attendant and asked if it could be passed to one of Bush’s staff. Heatley was reading when, five minutes later, someone approached him down the aisle. Bush sat down next to him and the pair talked for 45 minutes before Bush said, ‘I’d better get back to Barbara,’ got up and said goodbye. On a week that had already been memorable it was an unforgettable encounter. To top it off, the tournament ended in a sudden-death finish well into the evening of the final day, with Ernie Els and Tiger Woods sinking incredible putts for a draw."

"While Heatley is ready to credit good luck as a significant factor in his success, he does not have the Midas touch. His biggest corporate success, Sky, became a household name but other investments have failed, some at considerable cost. In about 1999, Goldman Sachs suggested an investment that he says was touted to him as a great opportunity for a few affluent investors. Walker Wireless was a new company started by Rod Inglis that was aiming to provide a new broadband/wireless network in New Zealand. Heatley had always believed in the internet and in mobile technology, although he says his first instinct on Walker Wireless was ‘nah, no’. However, partially swayed by the other investors who were involved, he made an initial investment of $2–3 million. His mistake, he says, was that once he was close to the business and felt that it did not know what it was doing, he invested more. Start-ups, as he personally knew, often needed more capital than the founders had initially thought. But over about five years as the company lurched from crisis to crisis, always losing money, he invested $10 million, and lost it all. He considers it an expensive lesson in knowing when to cut your losses, although that point is often learned only with the benefit of hindsight overlaid with regret."

"Stunned, he put the phone down. He did not believe what he had just heard, nor did he want to believe it. Surely it was not true. But what if it was? He did not feel as though there were any problems in his marriage. He and Katherine by then had three children—Ben, eight, Sophie, seven, and Nick, five. Outwardly, with their Takapuna home, a beach house north of Auckland, another house in Hawaii, any domestic help they wanted, a helicopter and, most importantly, all the family healthy and well, theirs was the very definition of a family that had it all. By any standards they led an enviable lifestyle. Now Heatley wondered if he knew anything at all. He had often been absent from his children’s lives—at work before they got up and sometimes still at work or at a dinner when they went to bed. Perhaps he did not know about his wife’s life, either."

"The following year, and now playing with a handicap of seven, he was invited to play in the Alfred Dunhill Links Championship, played on three courses including St Andrews, Scotland, the so-called home of golf, which arguably rivals only Augusta for the title of the world’s most prestigious club. It was an elite group in which Heatley teed off. He was partnered with professional golfer Fred Couples, Heatley’s friend Sam Reeves had arranged to partner with professional Adam Scott and, as a birthday gift, Reeves’ wife Betsey had arranged for Butch Harmon, the top-ranked golf coach in the world at the time, to caddy for Reeves. By then Heatley and Trevor Farmer co-owned a corporate jet that Heatley was licensed to fly. He flew the group from California to Scotland. They played some practice rounds and Heatley says he was panicky about the illustrious golf company he was in. ‘Here I am with two of the hottest pros in the world, and the number one coach caddying for Sam, and I was like a cat on a hot tin roof thinking, How the hell did I get in this position? I am so out of my depth.’ Heatley’s self-deprecation is disarming, but while he casts himself as the ingénue, in both business and sport he seeks out and enjoys the big league."

"Downey, who personally liked both men and professionally needed them to work harmoniously, tried to be a conciliator. He suggested that Smith and Heatley get together to try to agree on how to manage the boundary between director interest and CEO prerogative. ‘This requires you to back off a bit and Nate to come forward a bit,’ Downey told Heatley. Downey said he had suggested that Smith could try using ‘a humorous trigger word’ when he felt Heatley was pushing the boundaries, and perhaps Heatley could do the same when he thought Smith was not being sufficiently forthcoming. ‘I said to Nate, and now say to you, that none of these devices can work without mutual goodwill,’ Downey wrote. ‘With goodwill, any reasonable arrangement between or among people can be made to work; without it, even the most logical structure and process will fail.’"

"The trip was going as well as Heatley and Katherine had hoped and there was another new beginning when Katherine learned she was expecting their fourth child. They rented a large home outside London but, wanting to be in Maui for the birth of their new baby, they headed back to the United States. They went first to New York where, on 9 September 2001, the family went to the top of the World Trade Center, celebrating Sophie’s tenth birthday with a spectacular view of Manhattan and beyond. The following day they flew to Maui and on 11 September, like the rest of the world, they sat transfixed and disbelieving in front of their television watching the World Trade Center, on whose viewing platform they had stood just 48 hours earlier, collapse in terrifying explosions of rubble. Their fourth child, Josh, was born in Honolulu six weeks later."

"Most people need to work to support themselves or their families; Heatley did not. He and Katherine could afford to do whatever they wanted and to go anywhere in the world. They decided to get out of Auckland and travel for two years with a teacher for the children and an open mind about where they might settle. If somewhere appealed to them, they would stay. If not, they would come home. They started in Whistler, Canada, then travelled through the US, at one stage renting a house in Florida next door to Mar-a-Lago, which would later become famous as US President Donald Trump’s private club."

"Stevenson rang Heatley and told him what had transpired. He has always remembered Heatley’s response. ‘Don’t ring Bruce,’ Heatley said. ‘Nothing but good will come of this.’ It seems Heatley was recalling Gibbs’s words about dealing with the Americans back in 1991: ‘This is the way they negotiate. It’s all they know.’ If Heatley was concerned he did not express it to Stevenson. Stevenson was tempted to ring McWilliam to find out whether his peremptory finish to the call had been bluster or a genuine end to negotiations but he resisted, partly so he could say, if asked, that he had not spoken to McWilliam since the call. As it turned out, Stevenson soon had an unexpected visit from a lawyer from Russell McVeagh, representing the Americans. ‘He claimed to be there by chance and had dropped in to see me and to see if I might give Bruce a call later in the day. As it happened, we were just sending out wine to clients for Christmas. I said, “Look, I’ve told you guys, I’m not ringing him. I haven’t spoken to him since the conference call. If he wanted to talk to me, he would have rung, so here’s a bottle of wine and Merry Christmas.”’"

"Chisholm’s role in the negotiations was to maximise the return for News Corp. Heatley’s was to maximise the exclusivity for Sky, while minimising—as far as reasonable—the financial outlay. Both men knew the picture. TVNZ also wanted the rights, but its board was likely wrestling with the constraints faced by the boards of all government-owned companies: trying to weigh the public tolerance for spending against people’s expectations of service and trying to second-guess what their minister-shareholders would want them to do. TV3 would also want the rights but was likely to be priced out of contention, especially since it had just beaten Sky to the Super League rights so, Heatley thought, had probably spent its budget. But he could take nothing for granted."

"Around the time that Sky floated, all the talk in the investment community was about the internet. Even though it was years before the advent of social media sites such as Facebook and Instagram, there were already fortunes being made by those who invested in the right companies. Trying to analyse or use instinct or simply guess which the ‘right’ ones were was the key to making money. Walker Wireless was part of the hype. To tap into these opportunities, Heatley, Todd, News Corp and Japan’s Softbank Corporation formed a company that they thought had bright prospects. They called it eVentures New Zealand and Heatley had a 20 per cent stake. Its role was not only to invest in e-commerce and internet-related companies but to create new ones. Its founders were hoping to experience the sort of success with start-up companies that the original shareholders in PayPal and Trade Me later enjoyed. They also wanted to introduce to New Zealand online products that were working overseas."

"‘If there is one part of my corporate history that I could change, it would be that decision I made not to tell Trevor and Alan that I was selling my Sky shares,’ he says. ‘It was spur of the moment, based on my friendship with Rupert Murdoch and I did not think it through enough. I wasn’t trying to be clever, I wasn’t trying to do a deal behind the bike sheds and I wasn’t trying to do something that was not in their interests. My total concern was security of information, but that implies that I did not trust them and that is not true. I totally trusted them. So I don’t quite know, looking back, why I did it. It is a big personal regret and it caused some strain in our relationship for a while, but I consider both of those guys to be my close friends. Sometimes things like that happen in life—you get caught up in the moment, you don’t think something through and later you think, I should not have done that.’ Gibbs and Farmer later sold their Sky shares to Telecom."

"‘It was exhausting at times because he is a random idea generator and every day he would come up with a brand-new idea and I would investigate it and go back to him a week later and say, “Look, I’ve spent a lot of time on this and it was a great idea but I don’t think it’s going to work for these reasons,” and he’d say, “Yeah, I’ve already thought about that, so here’s what you should be looking at instead.” So the idea that he had come up with a week ago and that I had spent the week researching, he had already realised was a bad idea and he had moved on. It was fun, but exhausting. But as a CEO you want directors who are passionate about the business and no one was more passionate than Craig.’"

"Half an hour later the TVNZ team returned. Downey talked to them about contract law, about the nature of offer and acceptance. ‘This morning we made you an offer and you did not accept it so, to clear the air and make sure of exactly what we are saying now, that offer is gone because you did not accept it,’ he said. ‘We are starting again.’ In a brilliant deal for Sky, by the end of the negotiation TVNZ agreed to pay $5 million over three years—the same cost of Sky’s full package of rights from News Corp over the same period. ‘The beauty of the story for us,’ says Heatley, ‘is that for the first three years that Sky had wall-to-wall rugby, and while our subscriber numbers went through the roof, it cost us nothing. In exchange for a package of delayed rights and nothing live, we got TVNZ to pay us the same amount of money that we were paying Murdoch. I don’t want us to sound like smartarses, because I don’t mean it like that, but if TVNZ had been willing to pay that amount to News Corp, TVNZ could have won the exclusive rights for itself. But for various reasons the board of a government-owned company is a lot slower than the board of a private company. So instead of getting the rights itself, it had unknowingly just agreed to pay the full cost of us getting them.’ Ironically, just as Sky’s board had gone into the negotiation feeling under pressure from the government because Sky had the full package of rugby rights, TVNZ’s board had probably gone into the negotiation also feeling under pressure from the government because TVNZ did not have any rights. Board members may even have thought their jobs could have been on the line. After all, if the prime minister was angry that the live games were all going to be on Sky, how much angrier might he have been if TVNZ had emerged from the negotiations without even delayed coverage rights? For Sky, the deal was a triumph. ‘We felt very happy. It was fun,’ Downey says."

"⁠Even if Rainbow did not have the same star status, the mood was similar. For a while, Heatley says, he felt like he was ‘in a company that could go to the moon. We were the opposite of a bureaucracy. We were quick on our feet. We had smart people. We had the backing of banks.’ And Rainbow had Heatley himself as frontman, avidly reading the business news, interested in political and geopolitical situations, unafraid to pick up the phone and pitch a deal, his mind constantly turning over opportunities, readily engaging with the media and displaying a straight-up, easy manner.⁠"

"In 1994, Hart was approached by Sky’s marketing manager, Peter Scutts, with the rudimentary outline of a semi-professional Australasian rugby competition that Sky was proposing. The idea seems to have been for an eight-team competition—six teams from New Zealand and two from Australia—with Sky paying the Australian Rugby Union and New Zealand Rugby Football Union for television rights. The unions would in turn pay the provincial unions, who would pay the players. ‘Sky led the way, in my view, in looking at what was a realistic approach to professionalism,’ Hart says. He was in a difficult position—sitting on the board of the Auckland Rugby Union, which was opposed to professionalism, but keenly following any developments so the union was forewarned if a professional breakthrough was imminent. He talked to the ARU chairman and they agreed Hart should stay close to Sky. ‘The Sky story, which really is a sports story, said that rugby was crucial to Sky’s future and they wanted to be part of the evolution of the game in a way that would help secure the game’s future,’ Hart says. In the end, Sky’s proposal was overtaken by events."

"Through the early nineties, Heatley closely observed the debate. Professional rugby would need money. Sky needed rugby coverage. The synergy was plain but the breakthrough was elusive. ‘We knew rugby was the Holy Grail,’ Heatley says. ‘If the rugby union would agree, we thought there was potential for us to cover some of the minor games that otherwise got no TV coverage. That would give us a foot in the door. It was a time when rugby was still a religion, yet almost no domestic rugby was shown live and, before Sky, even a test match might be on at 2 p.m. at Eden Park and the soonest TVNZ might have the game on would be 3.30 p.m. or 4.30 p.m.’ Rugby authorities were worried that if people knew that they could see a test match on TV, even delayed coverage might reduce the vital gate takings that were every rugby union’s main source of revenue. To Heatley’s mind the situation also illustrated how much TVNZ, with no competition, took its viewers for granted. Live coverage was, and still is, expensive to produce, so TVNZ had no incentive to spend a lot of money on live broadcasts when viewers had no chance of seeing the game on another channel. If viewers had to wait two hours until after a game had started, and then the coverage was interrupted by advertisements, TVNZ had nothing to lose because viewers had nowhere else to turn."

"On the eve of the 1995 World Cup final, the chairmen of the South Africa, Australia and New Zealand rugby unions called a press conference to announce the formation of SANZAR (South Africa, New Zealand, Australia Rugby) and to make the shock announcement that Rupert Murdoch’s media empire, News Corporation, would pay US$555 million over the following 10 years for exclusive rights to televise all international rugby tours to New Zealand, South Africa and Australia and a new competition between franchises that would be established in those countries. It was an astonishing sum of money for a code that had had no TV sponsorship until then. The figure stunned not only the rugby community but other sporting codes too. A final clincher in Murdoch’s enthusiasm seems to have been watching All Blacks star Jonah Lomu’s explosive game in the World Cup semi-final against England. Murdoch executive Sam Chisholm—who had helped open doors for Heatley and Jarvis when they were first signing up TV rights for Sky and who Murdoch had headhunted from Packer’s Channel Nine—says that in a call after that match Murdoch told him, ‘This is amazing. We’ve got to have that guy…’[5](private://read/01jectdbce729daxqkxt7cbe8r/#mn38)"

"Compelling sporting content, Heatley reckoned, would bring its own publicity. ‘Watch how much free publicity we get if we have exclusive All Blacks touring South Africa—and watch how many new subs we get,’ he urged. Sky should be budgeting in the expectation of buying exclusive rights to live coverage of the next rugby and cricket world cup competitions, along with rugby league and domestic rugby coverage. These events were critical. ‘We could have the best marketing in the world but if the product is not compelling we will not achieve the market penetrations that we can and thereby generate the profits that are there for Sky.’"

"On 4 June, Heatley wrote to Smith again, this time about the ESPN contract, but the theme was the same and he directly spelled out his concerns and the need for urgent action: ‘I don’t want to harp on about programming issues but the main problem we face is that most sports contracts (rugby, cricket, league, netball etc.) are multi-year deals and even if we decide to get aggressive now, it would be years before we have any significant impact.’[6](private://read/01jectdbce729daxqkxt7cbe8r/#mn29) The company had to lay the foundation for these exclusive deals now rather than keeping the strategy in reserve for when sales stalled, he urged. If Sky was going to get 20,000 subscribers in the next few years, it needed exclusive coverage that people wanted to see, in particular, sport with local teams. But it would be complex and expensive to arrange, so the Americans had to be convinced that it was the right strategy and then commit the time and money to achieving it."

"‘It’s standard negotiating practice,’ says Gibbs calmly, thinking back on the episode. ‘You come to a deal, do due diligence and then say to the customer, “Oh, hell, I didn’t know that the debtors were running three days late and that the ink was low in the inkwells and there were a couple of other things that were a bit nasty actually, mate, so I don’t think I’m prepared to offer that much now, let’s call it $80 million,” type of thing. I’ve been through that enough times to know that it’s just a game. But Craig wasn’t in a position to put more money in. He may even have borrowed against what he had. I haven’t a clue, but I did know that he wasn’t in any position to go very far without getting this deal. We had play money in there, but he had all his capital.’"

"‘No, Alan! Shit!’ Heatley pleaded. ‘I’ve spent months on this. Our future depends on it. You’re playing Russian roulette! Eighty million dollars is still a lot of money. We can’t afford to lose this. We can do them a more favourable deal.’ Heatley was wretched. It was not simply the $108 million. What if this was the end of the deal altogether? It was a complicated partnership and there was nothing to stop the Americans walking away. The letter Gibbs had dictated had not even made a counter-offer. Heatley would have been prepared to take $80 million to get the deal done. Naturally, $108 million would be better than $80 million, but $80 million was better than no deal at all. No deal now was unthinkable. Gibbs was cool. He knew how much this meant to Heatley, but Gibbs also knew the Americans. ‘No,’ he told Heatley, ‘I know these pricks. I bet they’ll be back by breakfast. This is the way they negotiate. It’s all they know.’ The letter was sent by fax. Heatley waited, more anxious than he had ever been. If it was all over, where would they look for new investors? He did not have long to wait. The Americans replied. Gibbs had been right. The deal was on again, for $108 million. Heatley’s relief was palpable."

"Heatley knew that the other shareholders had not deliberately planned this outcome, but the company was in serious financial difficulty. As a businessman he could see it their way and he did not blame them. Nevertheless, it hurt. But he was not quite done—his money was dwindling but not yet exhausted. As Smart notes dryly, Heatley was parking his helicopter at Sky headquarters around this time, so he was not completely skint. Just as importantly, Heatley was not ready to give up and would not accept the dilution of his shareholding in the company in which he had invested so much. The board agreed to instead look for new investors who could provide new capital."

"Gradually a figure of NZ$108 million, with a raft of conditions, was reached. They shook hands on it. It was a phenomenal deal for Sky. To have even had the four companies sit around the same table, let alone agree on a figure that was well above the New Zealanders’ expectations, was far more than Heatley had dared hope for. Gibbs’s bullishness, Heatley’s salesmanship and Craddock’s legal skills had combined to pull off a coup. Now, everyone’s shares would become more valuable and, while most of the HKP price would be distributed among the existing shareholders, there would be $25 million in new capital for Sky, which would help strengthen the company’s balance sheet. Anxious to get the deal done and desperate to stop Sky’s bleeding, Heatley would have conceded a lower sale price but Gibbs had been resolute. ‘They’ll pay it,’ he promised."