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iSky onboard: Fellet details major My Sky upgrade

Sky TV’s My Sky HDi decoder is getting a major makeover, says CEO John Fellet, speaking to NBR ONLINE after the company’s solid half-year result this morning.

Currently, the broadcaster’s separate iSky download service only supports access via a computer (although with some finagling that computer can be linked to a TV).

 In about 12 months’ time, My Sky decoders will be upgraded to have direct support for iSky (a mix of catch-up viewing, a la TVNZ and TV3’s ondemand services, plus pay-per-view content).

The software-only My Sky decoder upgrade will let you watch iSky on your television, and control it with your remote, Mr Fellet says.

(The Sky TV boss confesses to a dislike for watching movies and TV shows on a PC screen. Your correspondent agrees, although he gets around the problem by watching downloaded content on his telly via an Apple TV wi-fi box.)

 Sky was looking at a physical upgrade to its My Sky decoder around that time (the broadcaster talked to NBR last year of a potential new box with more TV tuners, allowing more channels to be recorded at once, plus the addition a social feature for sharing favourite viewing picks with others).

“But when I saw Ultra HD on the horizon I knew I didn’t want to ship a new box without Ultra HD support,” Mr Fellet says – referencing a new type of television just coming onto the market that offers four times the resolution of today’s HD sets (no, there isn’t any content for it yet).

The upgrade will ride on the back of development work by Sky italia.

Ever-increasing broadband data caps will help its adoption, Mr Fellet says (a number of ISPs, including Vodafone, Orcon and CallPlus unmeter iSky content. But Telecom, which holds around 50% of broadband market, is conspicously absent).

A punt on igloo sales
igloo finally launched its set-top box before Christmas.

The new venture, 51% owned by Sky TV and 49% by TVNZ, offers all the free-to-air channels you get on Freeview, plus - for $25 pre-pay a month - a  sub-selection channels drawn from Sky TV's lineup. The service also features ondemand movies and TV shows (in a manner not dissimilar to the pending My Sky upgrade described above), plus pay-per-view sports events from time-to-time).

There's been speculation that the new service isn't attracting many customers.

Labour broadcasting spokeswoman Claire Curran reports that at a select committee hearing yesterday, TVNZ refused to comment on igloo sales, as did Mr Fellet today.

Pressed, Mr Fellet said igloo could achieve 30,000 sales this year from people making the digital TV switchover.

In an update to the NZX early last year, Sky TV said igloo could gain 50,000 subscribers in its first year. The CEO says sales were hurt by missing the start of the digital TV switchover.

Mr Fellet blames the delay on Pace, UK-based company that has the contract to make igloo boxes.

Although not happy with te delay, he sees it as nothing extraordinary. He reminds NBR the original My Sky HD box was eight months late, but at least Sky had an existing product to fall back on.

Mr Fellet says so far all igloo subscribers have been people upgrading from Freeview rather than downgrading from Sky TV. He expects over time some Sky TV subs will shift to igloo, but says its better for them to shift to the part Sky TV-owned platform than free-to-air TV.
 

Chump move by TVNZ?
igloo CEO Chaz Savage recently quit for a job at Telstra across the Tasman.

He gave an "exit interview" to Stop Press, which makes for intriguing reading - particularly this Q&A:

Q: What is Igloo's biggest obstacle to market?

A: "We've launched Igloo and the logo you see in the corner, now people need to understand what it is and why they need it. The challenge is a marketing one. We need to engrain ourselves around 'cheaper-than-Sky more-channels-than-Freeview', which is a simple enough proposition.

"Secondly is developing the product. How do we make it more appealing? Personal video recording (PVR) is a very obvious one, but then we have to factor in our shareholder Sky, which already has a very successful MySky HDi product. Would that canibalise that business?

"Although the set top box isn't PVR ready currently, it is able to become a PVR with an external hard drive or USB. Initially we held back that piece of functionality." [And it still holds off; a USB stick can be used for a half-hour live pause, but that's nothing compared to the one-click recording of programmes, or whole series, that makes a PVR so useful.] 

Whoa.

NBR has long maintained that 51% shareholder Sky TV wants to make igloo attractive enough to attract TVNZ (which chipped in $12.5 million) but not so attractive it will cannibalise My Sky subscribers.

Keen followers of igloo's Twitter account will have seen several questions about how often Super Rugby and All Blacks games will be offered on pay-per-view; igloo can't say.

Some will be frustrated by igloo's lack PVR functionality but  Sky TV can always upsell them them to its own My Sky service.

For TVNZ, the lack of recording capability makes igloo a dead-end.

How does Mr Fellet think TVNZ's CEO would feel reading Mr Savage's comments. 

Personally, I would feel like a chump. They seem to confirm suspicion igloo is tailored to Sky TV commercial mores.

For starters, Mr Fellet says it was not igloo CEO Mr Savage who made the call to leave out a hard drive.

"I made that decision," Mr Fellet says.

Mr Savage (drawn from Sky's marketing department) was not even onboard when the decision was made.

The Sky TV CEO is also quick to qualify his comments, adding that research (and the failure of high priced TiVo and slow sales of mid-priced MyFreeview boxes) indicated price was a big factor for people who had yet to go digital. The tipping point was around $200. He briefed his R&D team to come back with a set-top box that met that price point. They did, and the budget did not allow for a hard drive and sound-dampening and other paraphernalia around it.

That argument certainly makes sense for Sky TV in terms of attacking the budget market.

But Keallhaulled would like to see TVNZ aim a little higher, and demand a version of igloo with PVR functionality added - as Mr Savage has pointed out it can be.

That Commerce Commission content probe
Since May last year, the Commerce Commission has been probing Sky TV's contracts with ISPs (including a clause that allow them to source content from all-comers, but only charge for that sourced from Sky), plus "whether Sky’s agreements for the acquisition of content harm competition by denying actual or potential rivals access to a critical mass of quality content." (More on the arguments and counter-arguments for that one in my article yesterday here.)

Mr Fellet was relaxed by the endless inquiry (and I use "endless" in a formal sense; it has no official end point.)

From time-to-tiime the Commerce Commission was requesting information, and his company was cooperating. Given both the Broadcasting and ICT ministers share Mr Fellet's position his company does not enjoy a near monopoly as new technology threats loom (not so large, Quickflix' case), the Sky TV boss' relaxed stance is justified.

That Todd stake 
And what of long-standing Todd Communications' 11.1% stake in Sky TV, sold before Christmas.

Mr Fellet says underwriter Credit Suisse sold it to a series of institutional investors.

The Todd stake made it the largest investor after Rupert Murdoch's News Ltd, which holds 43.65% of shares.

Would have traded some of that profit for subs
Not everything is completely sunny in the Sky TV CEO's world.

Although profits were up, and more people shifted to premium services, total subscriber growth increased by less than 1000 to 846,988.

Historically, Sky lost subs in a post winter slump. Cricket held less appeal than rugby, and the beach beckoned.

Over the past couple of years, the pay TV broadcaster managed to break that pattern (helped by the World Cup).

Not so in the latest half-year, which gives the CEO mixed feelings about the result.

"I would have traded some of those financials for more subscribers," Mr Fellet tells NBR.

Sky TV shares [NZX:SKT] were up 3.77% to $5.23 in late trading.

ckeall@nbr.co.nz

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Comments and questions

Ha. TVNZ's been bending over forwards for Sky since the beginning. Why stop now?

Freeview works excellently. More good content than any sane person has time to watch (along with even more bad content, as is the case with all telly), and - as the name suggests - it's bloody well free.

Of course, if watching boxers giving each other brain injury is your thing, well, you'd wanna pay for that.

Fellet's done a good job but he has a monopoly on sport, a dying TVNZ, and a broke TV3.

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