John Drinnan: Sky TV's big battle

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Netflix and other subscription services are big competition for cable TV. Photo / AP
Netflix and other subscription services are big competition for cable TV. Photo / AP

The mainstream battle for pay TV subscribers will likely heat up during the New Year.

Discounting any new ventures -- who knows what will happen in the current environment -- it is already tough to make a buck in pay TV.

The first subscription video on demand (SVOD) operator Quickflix, is still around. But the big boys battle is between New Zealand-owned Lightbox (Spark) and Neon (Sky Television), pitted against Netflix.

Competition means more choice for viewers.

It also means more demand for programming, and that means greater costs.

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This time last year Spark announced a deal where broadband customer got Lightbox for free. The offer -- available from January 20 to April 30 last year -- gave Lightbox a big boost.

Now the 12-month term is about to end, Spark announced it had increased its projected bankrolling of Lightbox for the year from $20 million to $34 million.

$34 million is comparatively small for a company the size of Spark, and it makes sense.

The acid test will be how many people stick with Lightbox when the 12-month offer finishes during February to April.

Based on the retention rate for other short term (three and six month) free trials, Lightbox chief executive Kym Niblock is confident numbers won't slump.

Like Netflix and Neon, Lightbox won't say how many are actually using the platform.

It is said to to be commercially sensitive.

Life after free

As market leader Sky is at a disadvantage. It cannot allow its Neon offering to undermine its main pay service which delivers the bulk of revenue.

In my opinion Sky TV is ambivalent about the service -- more so than its Fanpass online packages for sporting competitions.

Joshua Jackson as Cole and Ruth Wilson as Alison in The Affair. Photo / Getty
Joshua Jackson as Cole and Ruth Wilson as Alison in The Affair. Photo / Getty

Sky chief executive John Fellet says that is not the case.

New Zealand pay television is Sky's main business. But for Netflix, New Zealand is an incidental part of its business plan to build a global network and it has indicated it does not care if the territory makes a profit. For Spark and Lightbox the big returns are from the uptake of broadband.

In its annual report Spark revealed the rapid rise of video streaming services, such as Lightbox has fuelled a 48 per cent increase in average fixed broadband data usage per New Zealand household.

Its not just the SVOD players like Netflix, Lightbox, and Neon. Online media such as You Tube are also having a huge impact -- and other video initiatives will increase demand.

Second tier TV

It is nice for Lightbox to have a deep-pocketed backer. Spark has invested heavily in media promotion but it can't afford to rest on its laurels.

More competition for programming rights means higher costs.

The definition of quality content is highly subjective and my perfect video on demand service might not appeal to you.

I can't understand why people watch some of the dross on pay TV.

My own consumption is focused on drama, documentaries and entertainment. Others people will be focused on sport. A joint venture between Lightbox and Coliseum Sport is making inroads into the sports audience.

Sky's recent five-year extension of rights to Super Rugby from 2016 is in my opinion fundamental to its future.

High profile and cult shows like Lightbox's Mr Robot may not have huge audiences. But they are stand outs and are the type of shows that people will pay to watch.

Dan Carter kicks a penalty for Racing 92 on Sky Sport. Photo / Getty
Dan Carter kicks a penalty for Racing 92 on Sky Sport. Photo / Getty

A second series of cult hit Better Call Saul screens on Lightbox early in the New Year and the latest series of the super slick Suits is coming up.

In my opinion, Lightbox has delivered some of the most cutting edge TV programming of 2015. It has a policy of playing top quality fare in one fell swoop, where possible, which meets the new demand for binge viewers like me.

But I wonder if it needs to improve its second-rung programming. There are good back libraries already of shows like Seinfeld and Modern Family.

So there is a bigger reason to tune in when there is no big new series.

Make Soho basic

Neon should be good way to get lower cost access to some of Sky's exclusive HBO content.

But there are no apps on either of my TV's, and I'm seldom prepared to watch shows on a computer when there is a big choice on TV.

I returned to Sky besotted with a raft of brilliant shows on offer on the Soho channel, including Ray Donovan, The Affair, Leftovers, The Jinx, The Americans, Fargo, Catastrophe and Silicon Valley.

And I love the arthouse movie channel Rialto.

But in my opinion, Sky is under pressure to improve its services.

At a cost of around $10 a month for Soho -- on top of the basic fee -- subscribers might take umbrage at seeing drama content being just part of the package turning up on Netflix and Light box, each charging $12.99 for their whole package.

Soho is a big earner for Sky TV. But in my opinion Sky TV needs to make Soho part of the basic package to give its main services a shot in the arm.

Print the future

Media are facing massive changes and the focus of big corporates is on developing digital arms.

The former head of editorial at Fairfax Magazines -- Kate Coughlan -- has gone back to being an independent publisher. And her focus is steadfastly on print.

She has even noted a trend overseas for successful digital publications to create niche offshoots in print.

Coughlan says targeted print titles that have a close relationship with readers have a strong future.

Megan Joustra on Sirocco Tango pictured during the NZ Horse & Pony Magazine Junior & Adult Rider Equitation Champiomship series. Photo / Glenn Taylor
Megan Joustra on Sirocco Tango pictured during the NZ Horse & Pony Magazine Junior & Adult Rider Equitation Champiomship series. Photo / Glenn Taylor

Well-honed lifestyle titles are suited to print.

On January 1 Coughlan bought back Life and Leisure and NZ Lifestyle Block from Fairfax through her company Lifestyle Magazine Group. About 10 staff are making the move to new offices in Newmarket.

Coughlan says Fairfax will continue to act for her titles with advertising agencies. It's not clear whether the LMG titles will fit into Fairfax joint buying packages.

Coughlan has been at Fairfax Magazines editorial for ten years, the past four as head of editorial.

She said that Fairfax wisely decided it was better suited to publishing mass appeal titles like Cuisine and NZ House & Garden.

Coughlan was once heavily associated with the former INL Group -- controlled by News Limited that was bought by Fairfax in 2003.

She left in to start NZ Life & Leisure and returned when Fairfax bought the title.

This time around Coughlan says she owns the titles herself.

Meanwhile, World magazine has also been sold back to its founder -- and publisher -- Don Hope.

Hope is also buying bi-monthly golfing title, The Cut.

NZ Horse & Pony and Ponies! have been purchased by editor, Rowan Dixon who takes over on March 15.

Fairfax retains several magazine titles, including NZ House & Garden, Cuisine, TV Guide and others.

- NZ Herald

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John Drinnan has been a business journalist for twenty years, he has been editor of the specialist film and television title "Screen Finance" in London, focussing on the European TV and film industry. He has been writing about media in New Zealand since the deregulation of the television industry in the late 1980s.

Read more by John Drinnan

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