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Sky TV to launch $20/month subscription video ondemand service

Friday 24th October 2014

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Sky Network Television, the country's dominant pay-TV operator, will launch a new $20 a month subscription video ondemand service, Neon, in December, targeting non-Sky customers as it faces intensifying competition for viewers.

The Auckland-based company told shareholders at the annual meeting in Auckland today that it forecasts annual profit rising as much as 8.6 percent in the 2015 financial year, would roll out Neon, update its customer set-top boxes early next year to enable an internet connection, and from next March start replacing all non MY Sky decoders with a new one that allows personal video recording and internet connectivity.

Chief executive John Fellet forecast annual profit of between $170 million and $180 million in the 12 months ending June 30, 2015, from $165.8 million in 2014, while revenue is expected to rise to between $930 million and $940 million, from $909 million in 2014.

Fellet said it was a two-tiered market. “We’re having trouble getting net gains but our existing subscriber base is buying more content from us than ever before.” While the pay-tv operator had a net gain of 10,000 subscribers for the year, it sold 125,000 premium products.

The new subscription video ondemand (SVOD) service will be available for a 30 day trial and then $20 a month after that for unlimited access to a library of movies and TV programmes. It will be available on PC and Mac using an internet browser and on selected iPhones and iPads through a free app. In the New Year it will also be available on Xbox 360 and selected Samsung Android tablets and phones

Sky TV is facing increased rivalry from rivals using cheaper web-based platforms, such as sports-focused Coliseum and entertainment-focused offerings from Spark New Zealand, formerly Telecom, as well as overseas services from the likes of Netflix, Quickflix and Ezyflix.

Fellet was coy on the expected uptake of the new service, saying it depended how hard internet service provider Vodafone pushed bundled services to customers and on a couple of content deals that had yet to be finalised. But he said in the US internet on demand had not hurt traditional pay-TV operators and he expected that to be the same here.

“It looks like it will be a nice adjunct,” he said.

Once Sky TV has completed the rollout of the new decoders and set top boxes in 2016, it will have effectively doubled its usable satellite capacity, said chairman Peter Macourt.

"Right now we are essentially dual broadcasting content to the two decoder types," he said. "This opens up future broadcasting opportunities for more channels, more HD content, and even ultra HD, with the increased capacity."

Sky TV today also signed a conditional five-year deal to secure broadcast rights to the New Zealand Rugby Union and SANZAR unions for an undisclosed amount with the current deal due to end next year.

When asked how much it cost Fellet said: “Trust me it was a lot of money. It was a lot of money 20 years ago, it was a lot of money last time, and a lot of money for the next five years and in 20 years times it will be a lot of money.”

He said the competition would last longer and be more involved than the three divisions now with Super Rugby growing to 18 teams.

Securing the rugby rights has been a major plank in the company's success in penetrating almost half of the country's households, and its investment in broadcast equipment has meant it's the only entity able to offer comprehensive coverage of local rugby.

Fellet said although only about 20 percent of its total viewers watched the sports channels, securing the rugby rights was important for the pay-TV operator which continued to base its offering on sports coverage as much as entertainment.

“In turn, you have to meet those expectations,” he said.

He warned shareholders that what had got it to 50 percent of all households over the past 24 years would not be the same as what got it to 75 percent penetration.

The focus would be on attracting non-traditional Sky subscribers who want to be able to choose their own content including shows recommended to them from overseas and watch when convenient to them. “They now have the opportunity to do that,” he said.

Shares of Sky TV rose 3.4 percent to $6.13.


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