Sky TV almost ready for great leap forward to internet viewing

Neon is a direct response to the new online players but is being strictly focused on consumers who are not already with Sky. Photo / Thinkstock

Sky TV is taking a big step on to the internet with a launch planned for some time in July.

An upgraded, internet-linked MySky set-top box will offer a new weapon to compete with online players Netflix, Spark's Lightbox and Sky's own Neon.

Like many parts of the media, pay TV is in a period of flux.

The threat of competition and technology has led to Sky having a relatively flat share performance over the past 12 months, according to James Smalley of brokers Hamilton Hindin Green. "It has underperformed the market" and the departure of News Corporation a few years back had also been noted.

Smalley says investors are still wary of the technological issues facing the firm.

Neon is a direct response to the new online players but is being strictly focused on consumers who are not already with Sky.

If it is too successful it could cannibalise subscribers from the much more lucrative linear channels.

Now Sky is betting that the MySky upgrade will allow it to shift online while sustaining lucrative returns.

Sky is offering subscribers more downloadable catch-up content and some preview content.

Chief executive John Fellet calls it "entitlement video on demand". It is a major step for Sky away from linear channels and on to the internet.

The big question is whether it can hold on to subscribers by offering linear channels, enhanced with online add-ons such as archived series.

"We are about 90 per cent done with it now and it's true it is a big step for us towards non-linear TV," he said.

The upgrade is occurring during upheavals as the internet takes over from broadcast technology.

Entertainment is moving online, and companies such as Chorus, which wholesale the broadband capacity, stand to win by catering to the increased volumes of video content being watched on several devices simultaneously.

Simultaneous viewing slows speeds, so multiple access will boost demand for premium fast broadband products, says Chorus.

People are upgrading from ADSL to broadband technology VDSL, and to a lesser extent from VDSL to Ultra Fast Broadband. Beyond broadband there is an issue over content - and in particular the voracious demand for exclusive content.