John Fellet: Came to Sky TV for 18 months, stayed 28 years

Wednesday 20th February 2019

For John Fellet, coming to Sky Network Television in 1991 was just another 18-month posting trying to sort out a pay TV network in trouble.

Twenty eight years later, having steered the company through a boom period but then seen it weakened by the sort of competition he could never had imagined, Fellet is today handing the problems over to someone new.

The US-born wannabe baseball player-turned-unhappy accountant got into the TV business by accident more than a decade before he got to New Zealand.

The story is that he put two goldfish into the water cooler at auditing giant Arthur Andersen, got kicked out, and stumbled into a finance job at local Arizona TV station TCI. Fellet’s a good storyteller.

“Then for 10-15 years I was the guy who came in to try to turn around bad systems. Nightmares. I moved every 18 months. I’d seen everything that could go wrong - like an advanced degree in paid TV management.

“I said if I ever got anywhere I liked, I’ll stay put.”

At first, it didn’t look like being chief operating officer at Sky TV would be that job. The company was only a year or two old but had already gone off the rails. It was millions of dollars in the red.

But Fellet liked it here. And he liked being part of a new company, with three channels -movies, sport and news - 125 employees and 23,000 subscribers.

“It was fun to come in and not have nearly all those issues the more established US companies had.”

Moreover, he’d have never got the chance to coach the national baseball team if he’d stayed in the US.

Fellet was appointed Sky TV chief executive in 2001, and for a long time presided over the rise and rise of the company. The network had everything from kids TV to porn, from nature programming to food and home renovation shows.

It also had, it sometimes seemed, a virtual monopoly in some premium programming, particularly sports.

Fellet’s reign saw the end of analogue, closure of the Fatso postal service, and a move into free-to-air TV with the purchase of Prime.

Profits were good and the share price rose to $6.50 over two periods - in 2007 and again in 2014. It rarely went below $5.

But more recently, times have got tough, with competition from a myriad of legitimate content providers like Netflix and Lightbox, as well as an almost infinite numbers of pirates.

The company wasted almost two years trying to merge with Vodafone - a move the two parties finally abandoned in 2017 after it was firmly rejected by the Commerce Commission.

And just today the country's largest telecommunications provider, Spark NZ, announced pricing and launch timing for its live sports streaming service. The service is aimed squarely at Sky TV's long-time dominance of key sporting content.

Sky may be weakened by the competition, but it's certainly not on the ropes. It still has more than 750,000 subscribers; 43 percent of New Zealand households have a Sky box. It will pay a healthy 7.5 cents a share dividend for the December half, and made over $50 million in profit.

Still, half-year revenues announced today for the six months to Dec. 31 were down 8.4 percent to $403 million compared to the same half in 2017. Net profit was down 19.6 percent at $53.6 million, and revenue from residential satellite subscriptions was down almost 10 percent to $322 million.

Average monthly revenue per residential subscriber has gone from $79 in the Dec. 2016 half, to $78 in 2017, and is now just under $76.

Would Fellet have done things differently in retrospect?

Not really, he says. Though he would have made sure he was on vacation when, relatively early in his time at Sky, a satellite spun out of orbit and everyone’s picture went dark for a day. That was the sort of 4am nightmare he’d thought he left behind in the US.

“What do you do? You pull out your disaster recovery plan; the one no one ever looks at. You check the schedule for key sporting events and try to find another way that customers can watch them.”

He doesn’t think Sky TV got into the internet too late, as some have accused. Rather the reverse.

“If anything, we were there too fast. We were sending content to mobile phones before iPhones existed; to computers when internet traffic wasn’t great.”

And Fellet doesn’t believe Sky’s set-top box pay TV model will go the way of the Blockbuster video store.

“Everyone is rushing to do standalone businesses - subscription video on demand. But people will realise they are paying more for all that than they are for Sky, and they will be looking for aggregation. Sky can be the aggregator of aggregators.”

What now for Fellet?

“I’m a people person. I’ve got my Uber ticket and I’m heading out there tomorrow,” he says.

He’s joking - though for the record, Fellet would make a great cab driver.

He says he hasn’t got a grand plan as yet, but is still a significant Sky TV shareholder and has no plans to sell his shares.

Perhaps you wouldn’t, with the price today being only a tad over $1.72, though Fellet’s not commenting on that.

He’s also going to remain a Sky director - at least until the AGM in October when he’ll come up for re-election.

By then it should be clear whether it’s going to work having a past CEO and a present CEO on the board together, he says.

Fellet is replaced by veteran British media executive Martin Stewart, who has the possibly unenviable task of moving Sky TV from a traditional satellite pay TV broadcaster to a multi-platform entertainment business.

Fellet says he and his predecessor CEO Nate Smith didn’t always see eye-to-eye, though they were friends. For example, Fellet never understood why Smith thought it was a good idea for Sky TV to own a football team.

“It was 2 percent of our revenue and 80 percent of our meetings. When he left, I killed that," he says.

Had Smith been on the board after Fellet became CEO "it could have been difficult. But after he left, I realised I could have used him.”

So for the time being, Stewart and Fellet will give it a go.

“I said I’m happy to exchange keys in the parking lot and you’ll never see me again. Or I’ll be a consultant for a dollar a year. Or I’ll be on the board. It was his call.”

(BusinessDesk)

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