John Drinnan: TV wars - Sky won't fall in

The success of web-based firm Netflix has enabled it to commission its own content such as <i>House of Cards</i>, starring Kevin Spacey, left, and Robin Wright. Photo / AP

Telecom venture won't seriously threaten pay TV rival but it will be more competition

Telecom's ShowMeTV should cut another chink in Sky Television's armour built up over 25 years of being a pay television monopoly.

By mid-year the venture looks sure to be on screens - which is more than some of Telecom's other TV ventures achieved.

But in the medium term, ShowMeTV will be another niche player and not the major force in television that some predict. Sky TV is unlikely to fall in a hurry.

The initial $20 million investment by Telecom is small compared with the money spent by Sky TV on content. And although online content does not need to be scheduled like linear channels, Telecom needs expertise on what New Zealanders want to watch, which leads to expectations that it will be linked to overseas online media organisations.

Many hope such a relationship will bring Netflix to New Zealand but Telecom is talking to other content suppliers, which would be unlikely under a permanent partnership with Netflix.

Telecom has made previous forays into media and come unstuck.

There was First TV in the mid-1990s - an attempt to roll out a Saturn-style pay TV venture in Auckland and Wellington.

After that came to a close the former head of Telecom's video unit, Philip King, led a video development unit from 2005 to 2007. That venture was also disbanded.

In 2009 Telecom got caught up as an onseller for TiVo, a half-hearted arrangement where the set-top boxes could be bought only at Telecom outlets.

Then there was its troubled expedition into the YahooXtra website.

Telecom has not worked well in media, but maybe ShowMeTV will be different.

The argument at Telecom - or Spark as it is to be rebranded - is that previous moves into internet TV had proved ill-timed and it was best that they withdrew, said Simon Hoegsbro, the Telecom executive heading ShowMeTV.

The ShowMeTV service does not have the capital cost of expenditure on new networks or set-top boxes.

Technology is one thing but Microsoft founder Bill Gates was the first of many business entrepreneurs to acknowledge that "content is king".

People want to be entertained no matter what the technology.

As services like Google TV explode, ShowMeTV faces a big task in securing content consumers will pay to see.

Sky TV and free-to-air broadcasters have focused on formal exclusive output deals with Hollywood studios - honed by their status as big programme buyers.

Web-based firms such as Netflix and - eventually - ShowMeTV are less reliant on exclusive deals. But they will still need some top-end content to lure customers.

Netflix in the United States has made its name with non-exclusive content which has become so successful it is able to commission its own programmes - such as the drama House of Cards.

It is early days for ShowMeTV and its success is linked to the takeoff of UItra Fast Broadband.

But as it stands, prospective customers can only guess if ShowMeTV will be better than the offering on similar services such as Quickflix.

Given Telecom's history as a half-hearted player in the television market, it may be that there will be links with other online players.

ShowMeTV will spur Sky's expansion away from services offering linear channels and on to the internet.

Sky has been deft at delaying investments in pay-as-you-go internet TV.

If Telecom makes an investment it may be forced to try harder.

With more competition forcing Sky to work harder in New Zealand to catch up on the online services available elsewhere, consumers willing to pay will not be forced to take pirated content.