Satellite remains king: why Sky TV faces a UFB challenge

Satellite remains king: why Sky TV faces a UFB challenge

Sky TV CEO John Fellet talks about new platforms, innovation and disruption

John Fellet (Sky TV)

John Fellet (Sky TV)

Sky TV has a problem - the satellite platform it built a content empire upon can't simply be turned off in favour of fibre.

According to CEO, John Fellet, there is nothing he'd rather do than turn that satellite service off - it costs the Earth.

Fellet told shareholders in the company's annual report, released today, there has been more disruption in the media industry in the last five years than the previous 30 years.

"Sky has been disrupted more than any other media firm in New Zealand because we are the largest media firm in New Zealand," he said. "But our size also gives us an advantage in this transition.

"We were delivering content to mobile phones a year before the first iPhone went to market. We sent content over the internet a year before Netflix had its first streaming customer."

Faced with increasing criticism of Sky's performance and prospects, Fellet doubled down, saying the company's strategy "remains the same".

Put simply, Sky is embracing the Internet while continuing to serve traditional subscribers, happy with the existing product.

"There are some ‘technical gurus’ who when interviewed are critical of SKY and believe we should abandon our ‘antiquated’ business model and cut the umbilical cord to the satellite," Fellet said. "Nothing would please me more.

"We spend circa $50 million dollars a year for the satellite to ensure we can deliver Sky to every home across New Zealand. Over 30 per cent of our subscribers are not even connected to Ultra-Fast Broadband."

Hence the prominent message on page four of Sky's report: "Internet or no internet, we have New Zealand covered."

Sky's biggest challenge, Fellet said, was in using the internet for sport delivery, with repeating stories of failures with the internet delivery of big live sporting events.

Fellet said internet viewership is also often overstated.

"My favourite viewing statistic came out of the recent FIFA World Cup out of England," he said. "Reports suggested that 24.3 million people watched the England v Croatia semi-final match on traditional TV.

"Other reports said that 4.3 million watched it via streaming. That is not bad, it would lead you to believe that streaming was up to a very respectable 15 per cent share. But when you dig deeper you realise the total figures are terribly misleading."

That's because in England, measurement for TV viewership is based on an average viewers per minute, he said.

The viewership numbers for streaming defines a viewer as anyone who saw a stream for three seconds or more, and is cumulative.

"If we applied the same rigours of TV viewing to streaming, viewership would be 1.7 million or 6.5 per cent," Fellet said. "This figure is high enough for us to offer internet options, but not nearly high enough for us to jettison use of the satellite."

Sky therefore streams through its Neon, Sky Go and Fan Pass services, but it is the costly satellite service that still does most of the heavy lifting.

Market changes

Fellet said the failed merger with Vodafone slowed Sky's innovation track. In order to keep a promise to Vodafone to launch its new TV platform.

Since then there has been a flurry of new products and services, including subscription video on demand service Neon, Sports Fan Pass online and mobile and Sky Go for tablets and mobiles. A new set top box TV guide functionality when connected to the internet.

Sky is now investing further in internet-delivered TV through a new platform based on the Cisco Infinite Video Platform.

"Through new and existing devices, we’ll enable a whole new experience, getting customers to the content they love more quickly, with personalised recommendations and a content-led, image-rich user experience," Fellet said. "We’ve always aggregated our own content with the world’s leading entertainment brands.

"And we’ll continue to do so through a combination of loved linear channels, on demand content and the best of global and local apps."

Sky is building voice capability as well, to allow voice search and a new fluid viewing capability will mean your chosen content will follow the viewer from the TV to mobile and tablet.

"The Technology and Product teams are hard at work on these projects and we look forward to revealing them to you soon," Fellet said.

Furthermore, the CEO said constant commentary whenever Sky gets outbid for content is misplaced.

"In thinking about content it is important that one understands the difference between price and value," he said. "Price is the amount you pay for something but value is what you get with that piece of content.

"The easiest thing to do is win content auctions. All you need to do is keep bidding until everyone else drops out. But you don’t actually “win” the bid until you extract enough value to cover your costs."

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