TV wars: Sky set to lower its prices in 2018

Sport has remained an area of strength for Sky, with the broadcaster having locked down the rights for New Zealand's tier one sports for a number of years. Photo / BackpagePix / www.Photosport.nz

Sky TV is considering dropping its prices in 2018, the Herald understands.

A source familiar with the situation speculated that these potential changes discussed were likely to include the introduction of a new budget package available for about half the price of the current basic package.

The cost of the basic package currently sits at $50, but subscribers have to pay additional fees for access to sport and movie channels.

The source said that the new basic package would offer a stripped back version of the channel portfolio currently offered under the basic tier.

Sky chief executive John Fellet would not confirm whether Sky was poised to launch the new pricing tier, but did say that Sky always looks at its pricing tiers and models around this time of the year.

"We do not comment on speculation," he told the Herald.

He said that Sky invests in extensive market research every year to find out what would work best for the company's subscribers.

He said there's always market speculation around this time of year, adding that Sky has traditionally only announced price changes in April.

The source who spoke to the Herald said Sky is hoping to attract a new audience that currently finds the entry-level fee prohibitive.

If this move is to come to fruition, it could, however, encourage current subscribers to drop to the new package, thereby reducing Sky's average revenue per user.

Sky's annual report for 2017, released in October last year, said the company's 824,782 customers spent an average of $78.82 each month.

Last year, Sky's revenue decreased 3.7 per cent to $893.5 million from $928.2m in the previous period.

This decline in revenue was in part due to the loss of 28,000 subscribers, who had cancelled their subscriptions during the year.

This comes at a time when Sky is facing strong competition in the entertainment space from SVOD providers, particularly Netflix which has spread quickly from being a niche player to now reach 1.2 million New Zealanders, according to Nielsen figures. Netflix's low entry cost, its breadth of content and the rapidly increasing internet speeds in New Zealand have all conspired to put enormous pressure on the paid TV model in New Zealand.

Sport has, however, remained an area of strength for Sky, with the broadcaster having locked down the rights for New Zealand's tier one sports for a number of years.

Sky's sports content is accessible either through the Sky sport package, which can currently be tagged onto the basic package for an additional $30 (Sky also offers a Platinum Sport package for $38.71).

This means sports fans are required to pay a minimum of $80 for a subscription that includes Sky Sport.

With the possible introduction of the new pricing tier, a sports fan could save $25 by switching to the stripped back basic tier option.

This obviously poses a significant revenue risk to Sky, but a sweetener for sports fans wouldn't necessarily be a bad strategic move given it comes off the back of a year when the broadcaster provoked ire among sports fans by announcing it would no longer sell daily and weekly online Fan Pass options and that it would increase the price of a monthly subscription to Fan Pass from $60 to $100.

There has also been talk this week that Sky is considering the introduction of a pay-per-view model for All Blacks rugby matches, but Fellet also hasn't confirmed whether this would go ahead.

Whatever happens, no doubt Sky's 800,000-plus subscribers and many yet-unconverted sports fans (particularly Fifa World Cup enthusiasts) will be keeping an eye on the moves the broadcaster makes over the next few months.