Sky TV 'would be pleased' with 10% customer uplift from video on demand service: Fellet

Wednesday 18th June 2014

Sky Network Television will launch a subscription video on demand service by the end of the year in a challenge to Telecom Corp., ASX-listed Quickflix, Ezyflix and eventually US-based Netflix, which pioneered such offerings and will reportedly enter the local market officially in 2015.

Auckland-based Sky TV's new service would be free to existing customers and available for a fee to non-customers, accessible via PC, Apple iOS and eventually Android and Smart TV. The service would cost US$10 to US$20 a month, based on prices charged by overseas operators, chief executive John Fellet told BusinessDesk. The company is currently working out how much content to offer and is in talks with suppliers, he said.

"Instead of building linear channels, it (the content) all goes into a pool," Fellet said. "The Sky model still works but when we talk to non-customers, clearly this has demand which we want to fill."

The potential size of the business was still being analysed "but if we could get 10 percent more customers that just took this services we would be pleased," he said. "In order to keep growing we think we need to keep reviewing different business models. We will not be able to go from 50 percent to 75 percent penetration" with the existing pay-TV model.

Sky TV had about 51 percent market penetration as at Dec. 31, based on 857,111 subscribers and the nation's 1.68 million households.

Telecom expects to spend $20 million starting up the on-demand internet-TV service being developed by its Telecom Digital Ventures unit, with some $15 million to be spent on content alone. The company, which will rename as Spark in August, said Sky TV's decision underlines the expected demand for such services.

"We’ve obviously seen Sky’s announcement," said Telecom spokesman Richard Llewellyn. "While there isn’t a lot of detail, it clearly indicates there is a growing appetite for on-demand content delivered via the internet. So we consider the imminent launch of our internet TV product to be very timely. We’ll be revealing more on that soon."

Fellet said he isn't concerned about the risk of cannibalising his own customers, as happened with the Igloo budget set-top box venture with Television New Zealand.

Some households want to have Sky but can't afford more than $25 a month. "If this is more appealing then that's fantastic. I would rather compete with myself than have someone else take customers off me," he said.

The service would be marketed by Vodafone as one of its bundles but the deal wouldn't be exclusive and Sky TV would talk to other telecommunications companies, Fellet said.

Netflix shares have soared 94 percent in the past 12 months and recently traded at US$443.65, valuing the company at US$26.6 billion. Sky TV fell 0.4 percent to $6.75 and has gained 16 percent this year, while Telecom fell 0.9 percent to $2.725 for a 18 percent gain year-to-date.

Morgan Stanley analysts say Netflix could win 20 percent of the 280 million international households with broadband access by 2020, Forbes reported this week.

BusinessDesk.co.nz

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