Telecommunications company Spark is selling its video streaming platform Lightbox to Sky Network Television for an undisclosed price.
The agreement reached by the two companies last night is still subject to regulatory and legal conditions.
Sky plans to merge Lightbox with its own streaming service Neon to offer more content and help it better compete with global giants such as Netflix.
"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 chief legal officer Sophie Moloney said.
"We will partner with fellow New Zealand companies, including Spark as telco partner, to offer the new enhanced entertainment service to as many New Zealanders as possible."
The deal comes after Spark announced it was keen to sell Lightbox earlier this year because it could not afford to create more original content for it.
Sky would pay the operating costs for Lightbox, but Spark will keep selling the service to its customers.
Spark's marketing director Matt Bain said the deal would support the growth of Lightbox.
"In the last five years, there has been significant growth and evolution in the subscription video on demand (SVOD) market," he said.
"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 television and movie streaming service, which benefits from a significantly enhanced range of entertainment content from Sky."
The two companies are still fierce rivals in battling for sports broadcasting rights.