Sky flags shift to on demand services

Sky wants to target customers who had a variety of choices and sometimes subscribed to multiple...
Sky wants to target customers who had a variety of choices and sometimes subscribed to multiple services, such as Netflix and Lightbox, to access the content they wanted. Photo: ODT files

Sky Network Television says it is moving to provide more on-demand services as it works to retain its sports rights and stabilise core earnings.

Long-standing chief executive John Fellet said yesterday he planned to retire within the next year, after 17 years' running the country's dominant pay-TV company.

In an investor presentation released to the NZX yesterday afternoon, Sky said it planned to introduce upgraded set-top boxes with on-demand functions and the ability to support higher-quality content, along with IP-only set-top boxes which delivered content via fibre instead of via satellite and an app-only platform.

However, it said it had not fully designed all of these, but wanted to highlight its options and how its current platform could change to offer a range of products at different prices.

Last month, Auckland-based Sky said it had lost 37,359 customers in the six months ended December 31, including the 10,608 it shed with the closure of its Fatso DVD rental unit, leaving it with 778,776 subscribers at the end of 2017.

The reduction in customer numbers trimmed subscriber-related costs and Sky spent less on programming.

First-half net profit rose to $66.6 million from $59.3 million a year earlier as sales fell 5.5%, and the company cut its interim dividend in half in an effort to cope with the rapidly changing environment.

In the commentary accompanying the presentation, Sky said it wanted to target customers who had a variety of choices and sometimes subscribed to multiple services, such as Netflix and Lightbox, to access the content they wanted.

Viewing experience accounted for 66% of customer sentiment, the company said, and it needed "a great solution for content discovery and to showcase the best content''.

"Having undertaken a robust review of our strategy, the objective of the session is to provide the investor community with more clarity about how Sky is moving forward after the terminated Vodafone merger, and how we are competing in the increasingly digital content market,'' the company said.

"Our core focus as a pay-television operator continues to be to secure exclusive content that matters to New Zealanders. Sports and blockbuster movies remain important, and premium drama is now as relevant as those two pay-TV mainstays.''

Sky said it would not move away from linear channels overnight, "but over time we expect on-demand to grow significantly at the expense of linear''.

Customer experience would be updated with a range of apps to be "on-demand centric'', include Sky and third-party content and have personalised recommendations, Sky said. It would be more portable and accessible through a variety of devices, with flexible payment models.

Sky said it expected to stabilise core earnings from its recent pricing changes, and to add incremental customers, as it focused on managing its cost base.

The financial analysis was "for illustrative purposes only and is not guidance''.

The company's shares recently traded down 2.6% at $2.26, and have fallen 40% in the past 12 months.

- BusinessDesk

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