Is Sky TV's dream run in New Zealand at last beginning to unravel? The pay TV monopoly's services have been taken up by 49.4 per cent households here making such a question seem preposterous. But there are three reasons why Sky's stranglehold on viewing choice may be weakening as tech savvy consumers find their own conduit to content; and why its outlook may indeed be looking a little cloudy.
Sky's biggest worry by far has to be the exit its cornerstone shareholder, Rupert Murdoch's News Corp, which bailed out of its 44 per cent stake in March.
That was preceded by the exit of its New Zealand stalwart - the Todd family - which sold its 11.11 per cent stake in November last year. Rats leaving a sinking ship? Possibly, but it could also be simply a shrewd investment move on the basis that, while still a solid performer, the company may have reached the limits of subscriber growth. Without the Murdoch empire at its back, however, Sky TV may not have such an easy time outbidding all comers for sports coverage as it has in the past.
The second concern for the company is the Commerce Commission having a hard look at whether Sky's contracts with internet service providers for the carrying of its content are hindering competition in breach of our Commerce Act.
Rumour has it that rather than dealing with an anti-competitive Sky head on, the Commission will quietly ask Sky to reconsider its apparently restrictive contracts with internet service providers on a mutually agreeable basis. Such a backroom deal would quietly allow internet providers to sign with other content providers as well as Sky and let the government save face and continue to be seen as regarding regulation as a dirty word.
But the government does have another pressing problem, which means the threat of wider regulation of Sky's activities remains a distinct possibility. Nearly two years after its rollout, the government's $1.35 billion ultra-fast broadband initiative (UFB) has the dubious honour of rapidly becoming both a white elephant and a lame duck. Just 5,133 out of a possible 171,886 users have signed up to connect.
The government doesn't want to admit it, but the slow uptake is almost certainly being hindered by Sky, which has hampered access to online video content.
Many think, it's a situation that has to be changed. Following this year's Budget, Xero chief executive and co-founder of the failed Pacific Fibre, Rod Drury, mused on a future where the ICT and Broadcasting portfolios were merged. He wished for a government acting in the interests of consumers with the new Minister charged with "unlocking content from overseas providers so it can be legally purchased in New Zealand (for example: Netflix, iTunes, Amazon) to stimulate UFB uptake."
The issue raises the third, and probably the real, threat to Sky - the growing use of internet-delivered TV. The ease with which one can get pretty much anything you want to watch via the net was brought home to me when watching Breaking Bad Season 5, which began on May 24 here on SoHo.
Somehow I missed recording the opening ten minutes of the first episode - possibly because we have been waiting so long for the series to get here that I'd given up hope. I could have easily gone to iSky to catch up, but out of curiosity I did a quick Google search and within a few clicks I was watching streaming video of the episode for free. What's wrong with this picture?
The show ran the United States in July, yet here we have to wait 10 months. Why? Because, online rights to shows like this are tied up by the TV networks - in Breaking Bad's case by TV3 which sat on the show until Sky came to the rescue. Why do we put up with such lousy service? Because we have no choice.
As blogger Matt Harnett points out, the lack of alternatives to Sky for watching such shows has an unfortunate consequence - turning many otherwise law abiding citizens into pirates. "We can't legally pay for these shows even if we want to!" says a frustrated Harnett. "So we don't bother. We go to The Pirate Bay or TorrentReactor or ISOHunt or whatever and we download furiously, hedonistically."
He's not alone. NBR's Chris Keall reported on a huge spike in data being sucked down to New Zealand from the United States when the first episode of HBO's Game of Thrones, season two, debuted on April 2 last year there. Season two didn't start here on Sky TV until April 16, so it seems a huge number of Kiwis were unprepared to wait. In an internet-connected world, such a situation seems ridiculous. "Alas, in terms of standalone download services it [Game of Thrones] will never appear on New Zealand newcomer QuickFlix, despite HBO's A$10 million investment, due to Sky TV having rights locked up," laments Keall. "Same goes for the hapless iTunes New Zealand."
Keall did, however, offer some hope - buying TV shows through the United States iTunes using iTunes gift vouchers that can be purchased online. The roundabout path is likely to be perfectly legal and gets around the problem of having New Zealand credit cards rejected by such United States-based online services. It may, however, be in breach of Apple's terms and conditions - a risk many seem prepared to take.
Such services enable users to sign up to services such as Netflix or Hulu to pay for an enormous array of video content.
But the real question here is why our government seems to think it's acceptable for Sky to dictate how and when we can watch TV, and deny consumer choice in much the same way, bizarrely, as happens in North Korea. Rather than being seen as a modern, well connected, tech savvy economy, New Zealand is increasingly being seen as a backwater joke, with limited content and ridiculously expensive internet access castrated by unrealistic data caps. As one United States visitor was heard to comment incredulously: "You guys still have video stores?"
This column has been corrected from an earlier version, which referred to Sky TV owning the rights to earlier seasons of the show Breaking Bad. Those rights were in fact held by TV3.