John Drinnan: Shedding light on Lightbox

Announcement is likely to reveal next move in campaign for video market.
Kym Niblock - pictured launching Lightbox in 2014 - says it is not yet ready to reveal its next move. Photo / Dean Purcell
Kym Niblock - pictured launching Lightbox in 2014 - says it is not yet ready to reveal its next move. Photo / Dean Purcell

Spark-owned Lightbox is developing its pay TV offering and an announcement on its next move is expected soon.

That might give some clues as to how the listed telco will compete against the solidly established Sky TV and the new global juggernaut, Netflix.

In a marketing sense, expanding Spark's pay TV offering makes sense. Spark is keen to maintain its brand in the entertainment arena, and Lightbox has a lot of marketing power, though it is hard to assess how well it is doing financially as it heads into a new initiative.

Like other subscription video-on-demand services, it does not spell out subscriber numbers, market share or financial performance.

"It makes sense to use our resources, but Lightbox is still an independent operation," said Spark spokesman Richard Llewellyn.

Lightbox boss Kym Niblock said the company was "not ready" to reveal the upcoming change.

Meanwhile, tweaks to the pay TV operation have brought it closer to the Mother Ship. This year, Spark promoted Niblock, the Lightbox chief executive, to cover a wider brief overseeing media at Spark.

And Lightbox marketing is now being handled by Spark, which has more leverage in deals with media.

Initially, Spark budgeted to spend $20 million on Lightbox. That increased to $35 million for the year to June 30, 2016, including the cost of the 50:50 joint venture with Coliseum Sports Media, called Lightbox Sport. Spark chief executive Simon Moutter has said it plans to spend a similar amount in the 2016-17 financial year.

In my opinion, when it started in August 2014, Lightbox lacked crowd-pulling content, and the absence of movies limits its potential for growth.

But since it launched, the content has improved substantially. Lightbox has said it has focused on first-time exclusives including US cult fare such as Better Call Saul and Mr Robot.

And with the Lightbox Sport joint venture, Lightbox has the tools to take on Sky TV, whose success is built largely on its dominance of sport.

Sporting chance?

But taking on Sky in sport will be a long haul, even with Spark's financial support. With the growth of global sports media, there will be extra demand for overseas content.

Right now, Sky and Lightbox are both negotiating to show English Premier League football on New Zealand television.

Sky TV chief executive John Fellet recently warned that increased programming prices were harming profits. But Niblock does not see programming inflation as an issue. She said programme prices were now "about right" for a country of this size.

Sky and free-to-air channels such as TVNZ and TV3 had enjoyed low prices in the past, Niblock said.

The cost so far is a drop in the bucket for a company of Spark's size. And discounted Lightbox is a useful incentive to boost its share of broadband customers. However, Spark management will be looking to the time when Lightbox is more than a loss leader and makes a profit.

Spark will need to ramp up its offering if it hopes to maintain its pursuit of top end programming against established players such as Sky and Netflix.

Maybe the strategy will become more apparent with the upcoming announcement.

Building walls

Otago Daily Times owner Allied Press is taking a careful approach to its paywall.

The shift to charging for some online content is expected next month, but ODT editor Barry Stewart said the company had not yet set a definite launch date and had not finalised the price structure, including the number of stories that can be accessed free.

The introduction of the paywall will follow the launch of a new website and a new mobile app. That app was being seen as a significant development for the ODT, he said.

The paywall is also significant for the big news groups, Fairfax and NZME, which have investigated and shelved their own paywall projects.

Without such a source of revenue, the big players' focus is on online advertising and that means attracting big numbers to their websites.

Stewart said the company was making sure it had ironed out the inevitable gremlins at the start of what is a major initiative.

The main impetus for the change was to promote the ODT's journalism, he said.

Many who work in newspapers will be wishing the ODT the best of luck with the initiative, which is not without risks.

The challenge will be whether advertisers stick with the online arm if there is a fall in user numbers after the paywall is introduced.

Stewart said every locality was unique and other publishers should not take any lessons from the ODT.

Asked if the paywall would mean the ODT was less susceptible to focusing on click bait - overhyped headlines on mundane stories to drag in readers - Stewart said that had never been an option; the ODT did not have the resources to focus energy in that area.

Stewart said the shift to a paywall would not affect the content sharing relationship between the ODT and the Herald.

- 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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