The answer to the smart TV threat? For Sky UK, it's to release their own TV. Photo / File
Sky TV NZ decided not to go down the radical road taken by Sky TV UK - and its rationale is interesting.
But before we get to that, let’s rewind and relive the perfect storm that delayed Sky NZ from releasing hardware for the age of apps and streaming for the best part of a decade.
Our story starts back in 2015 when Sky hit on a merger strategy. The multi-national Vodafone was open to selling its New Zealand business (which would later go to Infratil and Brookfield) - and with it would come access to Vodafone TV, a gadget that could deliver both pay-TV broadcast channels and streaming apps like Netflix.
In short, Sky’s in-house efforts could be put on hold, because the Vodafone deal would deliver a ready-made solution.
In June 2016, Sky and Vodafone went public with their merger plans.
The Commerce Commission objected. The regulator ruled in February 2017, after an extended think about things, that it would reduce competition.
It was a ruling that would prove quickly dated by events, as over the next two years, the newly minted Spark Sport revealed it had seized World Cup Rugby (and later cricket) rights, and Disney pulled content from Sky ahead of the launch of the global Disney+, among other developments.
Still, it stopped the deal in its tracks at the time.
In March 2017, Sky and Vodafone said they would appeal. But the telco would later get cold feet, and in June the pair said they had mutually agreed to abandon the merger.
After a lost two years, during which time all of its in-house upgrade efforts had remained largely on hold, Sky was back to square one.
In October 2017, Vodafone launched version one of Vodafone TV in NZ. It offered Sky’s channels, under a wholesale deal, plus Netflix and other apps. It initially got a bad rap due to sluggish performance, but after a faster second-generation box was released, it hit its stride and went on to sell around 150,000 units.
By that time, then-Sky CEO John Fellet was also talking up the possibility of a “puck”; a pending Android-powered Sky device that would provide the same functionality as a Vodafone TV box.
At a March 2018 investor day briefing, Fellet formalised this plan, telling shareholders that Sky would use Google’s Android TV Operator Tier software for a new puck that would deliver Sky’s channels via broadband, plus Netflix and other apps, which would be sold alongside a more traditional Sky decoder that retained a hard drive but could record more channels at once.
Essentially, Fellet was outlining the Android-powered Sky Pod and the more full-blooded Sky Box that would eventually be released at the start of 2023.
But more torturous twists were to come. In June 2019, Sky’s new-broom CEO Martin Stewart cancelled development work on Fellet’s puck, with the broadcaster taking a $38m write-off.
The existing Sky decoder was fine for those who wanted a physical box. Instead of hardware upgrades, Sky would focus all of its energies on upgrading its Sky Go, Neon and Fanpass (now Sky Sport Now) apps.
But within two years, Stewart had left the building to return to the UK.
Sophie Moloney was named Sky’s new CEO in December 2020.
The new chief executive revived plans for an Android-powered hardware upgrade. The idea was that third-party streaming apps were here to stay, across an ever-proliferating number of platforms. Sky would give exhausted consumers a one-stop shop, allowing them to access any app or channel (at the same time, Sky has continued to expand Sky Sport Now and Neon).
In November 2021, Sky named the partners who would build its new hardware.
But when the scheduled release date - June 2022 - rolled around, the new Sky Box and Sky Pod were nowhere to be seen. Supply chain issues related to the pandemic and the war in Ukraine were blamed.
We’re now, finally, seeing the early rollout of the new Sky Box and Sky Pod after last-minute tweaking was weighed against what Jarden called “keeping the lights on at Vodafone TV” - a $7 million cost to Sky between June and December last year (Vodafone TV offered Sky channels under a wholesale deal; Sky said it would offer Vodafone TV users a Sky Pod following the closure of Vodafone TV, originally slated for September last year).
But the viewing landscape has changed beyond all recognition since Sky and Vodafone first mulled their merger, and an app-supporting box, eight years ago.
Watching apps on your telly is now old hat. Almost every TV sold since 2017 has been a smart TV, with Netflix et al just the remote away. And Spark Sport’s rugby adventure dragged late adopters, kicking and screaming, into the streaming age back in 2019.
In the UK, Sky sought to overcome this development by releasing its own TV: Sky Glass, which comes with a built-in Sky decoder, and the usual smart TV support for apps. There’s no separate box, and there’s only one remote.
All content, including live Sky channels, is delivered over the internet, so there’s no need for a satellite dish.
Sky Glass, first launched in late 2021 and upgraded in December, comes in 43, 55 and 65-inch models, each with mod-cons like 4K, HDR, a QLED screen, voice commands and Dolby Atmos. It’s had good notices for its usability, screen and, especially, its audio (Sonos veterans were involved in the design). There’s no hard drive; catch-up viewing is done via an on-demand service.
Up-front pricing is competitive for a mid-range TV, or you can pay it off in monthly instalments starting at just £14 (NZ$27.82) a month. If you have Sky UK’s top-tier package, then you get Netflix thrown in free for the life of your plan (those on cheaper plans get three months free).
On the face of things, Sky Glass looks like an elegant solution for catching and keeping middle-of-the-road Sky subscribers, at least for the lifetime of their telly (the Sky Glass unit can be used without a Sky subscription, but loses a lot of its frills).
“We admired the new Sky Glass TV when Sky UK revealed it earlier this month. We have already connected with both Foxtel [in Australia] and Sky UK on this opportunity and will watch with interest as they roll it out, and, of course, are open to further discussions if it is something our customers want in this market and which can be made to work from an economic perspective,” Sky NZ’s Chris Major told the Herald soon after the initial Sky Glass release in the UK.
This month, Sky NZ is still keeping a watching brief, but an insider told the Herald it’s still seen as too expensive a risk.
They also noted that there are a few practical issues. For instance, if you want to go multi-room, then you have to install at least one Sky box - Sky UK’s “Stream” puck, which is its equivalent of the Sky Pod here (Sky UK also has the Q, which is similar to Sky NZ’s new Sky Box). That’s extra hardware, at £50 (NZ$99.36) per pop.
And while it’s hard to gauge Sky Glass’s commercial success (Sky UK is these days owned by the US giant Comcast, which buries Glass in a sweeping “other” category in its accounts), it’s notable that Sky UK headlines its Stream puck in its promotions.
The next couple of years will prove Sky Glass’s worth, and whether Sky NZ was right to give a make-a-TV strategy a miss.
But already, the landscape is shifting again.
By pulling its channels from the Sky Pod’s TV Guide, TVNZ highlighted that its TVNZ+ app is now not just about on-demand content, but livestreams of TVNZ1, TVNZ2 and Duke. That is, broadcasting them over the internet.
An insider at Freeview (which handles free-to-air broadcasts) told the Herald it’s working on the assumption that most terrestrial TV broadcasts, collected by a Freeview ariel on your roof, will cease in 2035. After that, all free-to-air content currently broadcast by Freeview (including TVNZ, Discovery, Māori TV and the Freeview-delivered version of Sky’s Prime) will be all streamed, all of the time, whether it’s live or on-demand. Functionally, they’ll no longer be any difference between an app and a traditional broadcaster. That will, again, upend the way we consume our content.
There will be one constant. Content will still be king, however it’s delivered. So while Sky’s deliver strategy will shift between hardware and apps, its core survival strategy will be timeless: keep a tight grip on local sports rights.
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