Telecom's Lightbox no sweat for Sky

Sky TV chief executive John Fellet is not breaking into a sweat after Telecom's slow motion launch of subscription video on demand service (SVOD) Lightbox.

Lightbox will go live towards the end of this month at the same time as Sky releases details of its own such service, cementing its dominance of the pay television sector.

Telecom will have the advantage of its dominance of the broadband market to reach entertainment customers and symbolically move from its image as a bureaucratic telco.

Sky will have the benefit of having its pay TV services in more than 50 per cent of homes and being able to use its programming expertise.

It will be an extension of Sky TV's influence but will require it to do some juggling of programme options.

Telecom executives suggest that Sky's existing pay TV dominance has negatives as well as positives, such as the risk of cannibalisation.

Sky will want an SVOD service but will not want to cannibalise its existing revenue base from the main Sky platform.

"You won't be able to get everything on SVOD that you can on Sky," Fellet said. "That [cannibalising customers] has not been the experience in the US," he said.

It was a tag-on and not a replacement.

"Look you won't be getting everything [available] on Sky."

Some believe another outcome might be that Lightbox competes for premium channels like SoHo or multiroom packages, reducing how much each customer spends.

Forsyth Barr analyst Blair Galpin agrees the immediate impact of Lightbox on competition has been overstated.

Telecom is spending just $20 million which made Lightbox an experiment and not a challenge, Galpin said.

The new Telecom service is starting with 5000 hours of programming and will feed homes with TV over the internet for $15 a month.

The pricing structure for the Sky service is expected to be similar.

But the question for many will be whether Sky can offer better content with more first-run programming and exclusive options.

Sky is New Zealand's biggest buyer of programming and has extensive ties with Hollywood studios who will supply much of the content for its SVOD service.

That was illustrated on Thursday with the timing of a statement by Sky immediately before a Lightbox announcement that spelt out an expansion of Sky's exclusive deal with HBO - the organisation that supplies TV fare for Sky's premium drama channel Soho.

Forsyth Barr's Galpin said: "What is not clear from Sky TV is if its SVOD focus will be on providing more value to existing subscribers to retain them or to attract new customers."

Sky had slowly increased prices adding new channels each year to its basic package to increase the value.

Forsyth Barr issued a note on June 18 which said that internationally the introduction of SVOD had led to a slowdown in the growth of pay TV.