Sky has purchased Spark's streaming service Lightbox and plans to merge it with its current platform Neon.
The announcement on Thursday comes as Sky attempts to keep up with the rapidly growing streaming market, dominated by Netflix and with new players such as Disney+. Currently, Neon is largely supported by Sky's offerings on channels such as SoHo.
The merger will take place in early 2020 with a conditional sale and purchase agreement signed on Wednesday night. Legal, commercial and regulatory approvals must still be given.
"With the increasing arrival of the mammoth global players in the New Zealand market, the purchase of Lightbox allows Sky to offer an enhanced, highly appealing and competitive entertainment service, delivered by Kiwis to Kiwis," Sky's chief legal, people and partnership officer Sophie Moloney said in a statement.
Customers who currently access Lightbox as part of a mobile and broadband plan bundle will continue to have access while the deal is concluded and through a transitionary period. This period will follow the completion of the deal, when technical work is underway to merge the two platforms. Spark will continue to run the operations during this period, with Sky meeting costs going forward.
When that transition is finished, Spark will partner with Sky to make the service available to Spark customers through the telecommunication company's entertainment offers.
Customers will still be able to pay for service directly.
"In the last five years, there has been significant growth and evolution in the subscription video on demand (SVOD) market," said Matt Bain, the marketing director at Spark.
"Selling the Lightbox business to Sky ensures a sustainable future for Kiwi SVOD services, while giving us the ongoing ability to provide access to a high-quality TV and movie streaming service, which benefits from a significantly enhanced range of entertainment content from Sky."
Lightbox was launched in 2014, and according to a Horizon Poll in October, was subscribed to by about 630,000 Kiwis. About 250,000 New Zealanders accessed Neon. The largest streamer was TVNZ OnDemand with 2.1 million viewers, while the largest subscription-based service was Netflix with 2 million viewers.