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SKY TV boss on content wars, satellite vs UFB

Sarah Putt, Contributor. 20 September 2018, 6:18 pm

In his 17th and final letter to SkyTV shareholders in the company's annual report, departing CEO John Fellet spells out why the content game is one of the hardest of all the play. The internet may be eating into traditional broadcasting business models, but according to Fellet it is not yet able to deliver to all of the people, all of the time.

"Internet or no internet, we have New Zealand covered." Is the last line of the vision statement expressed at the front of the report, and it's a theme that Fellet returns to repeatedly in his four-page letter. For anyone interesting in the convergence of media and telecommunications, it's worth a read in its entirety, but here are some of the highlights.

On the competitive landscape: "Historically, the challenge was always to build a platform big enough in order to obtain the necessary scale. With the roll out and acceptance of fast broadband, getting into the content game has never been easier. This has allowed any company from a global tech giant to a niche content App-based provider to launch a service in New Zealand. Competition has also come from non-media third parties who are starting to give away or subsidise content in packages with their normal product in an effort to "de-commoditize" their traditional offerings."

On content: "We are now living in the age of 'peak content'. In 2012 there were 266 English scripted television series. I predicted that in 2018 that figure would jump to 534, and we are currently on track to do so. And the content itself is evolving. For much of my life, in the animal kingdom of content, most programmes fit into four species: Sport, Movies, TV Series and News/ Documentaries."

According to Fellet there are two new content areas. There is "Prestige Drama" which he refers to as "television series on steroids" with "huge budgets, they have the pick of the best actors, writer and directors." And there is Reality TV, which has been driven by Free to Air broadcasters and in which the contestants, unlike actors, are usually not paid.

On losing content: "The fact is, we get out-bid for content every year. In thinking about content it is important that one understands the difference between Price and Value. Price is the amount you pay for something but Value is what you get with that piece of content. The easiest thing to do is win content auctions. All you need to do is keep bidding until everyone else drops out. But you don't actually "win" the bid until you extract enough value to cover your costs. There are several contracts we have lost over the years, but seldom has the same company come back the next time and bid the same amount."

He reveals that SkyTV has been outbid on the Oscars in 2019, but he notes that viewership had been declining over the past four years.

On technology: "We are embracing the Internet and the benefits that it derives while continuing to super-serve our traditional subscribers, who for the most part are happy with the product they are getting from SKY. There are some 'technical gurus' who when interviewed are critical of SKY and believe we should abandon our 'antiquated' business model and cut the umbilical cord to the satellite. Nothing would please me more. We spend circa $50 million dollars a year for the satellite to ensure we can deliver SKY to every home across New Zealand. Over 30% of our subscribers are not even connected to Ultra-Fast Broadband. Our biggest challenge in using the internet is with Sport delivery. We are not the only ones. Around the world there are repeated stories of failures with the internet delivery of big live sporting events."

 

Fellet ends the letter noting that he has been with SKY for 27 years, he thanks his team, his board, his family, sports administrators and content providers. He leaves the role in uncertain times with massive competition from huge global players. For example, Netflix is expected to air around 700 original series, films and other shows this year, and is steadily increasing the amount of content available here, with Kiwis now able to access 81% of what's available to US subscribers.

But Fellet won't entirely leave the building, he will continue to be on the SKY Board after a new CEO is appointed. He hasn't quite given up the game.


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