John Drinnan: Voda-Sky deal a win-win-win

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Merger plan promises to deliver for Sky, Vodafone — and maybe even Sky subscribers.
Hopefully, subscribers will see an end to problems with Sky's digital technology through this merger. Photo / Paul Estcourt
Hopefully, subscribers will see an end to problems with Sky's digital technology through this merger. Photo / Paul Estcourt

Another day, another media merger.

The combination of Sky TV and Vodafone amounts to a takeover of Sky.

The UK-based telco will have 51 per cent of the shares in the merged group and Vodafone chief executive Russell Stanners will be in charge - assuming the plan is approved by the Commerce Commission.

I believe the merger will revive Sky's tattered role as pay TV supremo and give Vodafone a new lease on life.

In my opinion it is likely to mean a change to Sky's unravelling subscription model, now under pressure from Netflix and newer players like Google and Apple TV. The deal will be considered over the next six months, while the commission is also considering the proposed Fairfax-NZME merger.

The Voda-Sky deal makes sense. Vodafone had a deficit of $120 million last year and Sky is struggling to adapt to lower cost competition. Vodafone gets to merge with the biggest local owner of content and relationships with Hollywood studios.

Importantly, the merged company will be able to offer more mobile packages using Sky's dominance of sports rights. Sky will get a highly developed technical arm, allowing it to distribute content on the internet and mobile.

And hopefully, subscribers will see an end to problems with Sky's digital technology.

How will Spark react? It will be hard to double down on its investment in Lightbox, already a significant loss leader, on which it will have spent $35 million in the year to June 30. Spark comes nowhere close to matching the content that a Voda-Sky combo will be able to offer. There are said to be concerns on the Spark board about the potential cost of spending on TV. That debate will be even more of an issue now.

Stanners' rise

The ascendancy of Stanners is not surprising. He and Sky boss John Fellet have very different styles, but the two have been close for a long time, and some at the Sky have viewed Stanners as the heir-apparent when Fellet steps down.

Video

In their new roles, Stanners and Fellet will both be on the board of Voda-Sky and Fellet will be CEO of media and content, reporting to Stanners. In my opinion, the immediate issue is whether the new company alters the structure of Sky subscriptions, which force subscribers to pay for content they don't want in order to see content they enjoy.

This approach is fundamental to its business plan and means that Sky deals - while offering better content - are being priced out of the market by cheap subscription video on demand services.

No worries, Mike

Television New Zealand has rejected a complaint against Mike Hosking's attack on New Plymouth mayor Andrew Judd. The TVNZ complaints committee said Hosking was allowed to give a personal opinion.

The Seven Sharp presenter criticised Judd, who decided not to seek office for a second time because of abuse he received after calling for Maori appointees to the council.

The TVNZ decision is significant given Hosking's political stance and changes to the 7pm lineup, with TV3 no longer offering John Campbell at that time.

At the time of the May 4th item, Hosking's attack on Judd drew comment from other TVNZ staff. There was widespread support for the New Plymouth mayor, including from One News presenter Miriama Kamo, who wrote on Facebook about prejudice she had faced as a Maori. In my view, Seven Sharp knew there was something wrong, because it ran two follow-up stories.

While TVNZ's view is that Hosking's statements do not reflect TVNZ opinion, New Zealand is unusual in having shock jock style opinions being delivered during a prime time current affairs show.

Downward slope for peak time television

Late night viewing numbers have fallen hardest in a trend towards smaller audiences for New Zealand TV, according to figures collated by "digital transformation" group VivaKi.

A report compares viewer numbers last month to the figures for May 2011 and 2006. On average, peak viewing is down by 11 per cent in the past five years, but after 9pm the drop is 26 per cent.

Viewing tends to be steady during the early evening news and entertainment programmes, said Martin Gillman, managing director of the marketing agency Krunch. But later in the night people had always drifted to Sky, and that drift had increased with new options such as Netflix and Lightbox.

Gillman said networks liked to focus on increased on-demand viewing, but that was still less than 2 per cent of all viewing and did not earn as much advertising revenue as ads that ran on live TV. "It's the classic argument that applies to print," he said. "The newsprint dollar is the digital dime."

"The more you go down the digital track the less revenue you are earning"

Debate on this article is now closed.

- 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.

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