Kate Bulkley, Media Analyst.

Sky Q offers a new flavour of TV

By Kate Bulkley

Broadcast News

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For Broadcast December 03, 2015

Launch marks broadcasterís move into quad-play, says Kate Bulkley

It wonít just be the turkey and trimmings keeping people nourished this Christmas, with TVís biggest players offering up a veritable smorgasbord of things to watch, and ways to watch them. The likes of Netflix, Amazon, BT and the new Apple TV (to name just a few) are all vying for our attention alongside more established operators like the BBC and ITV. Early next year, Sky will add yet another to the mix.

Sky Q, a new premium service, will offer another Ďflavourí of TV, a move set to segment the TV market even further and, according to UBS Global Research, help Sky keep its highest-value customers happy by offering them even more.

It will offer lots of whizz-bang: increased recording capability, more storage for downloads, touch-screen remote, voice activation and UHD. UBS estimates 2.5 million high-value subscribers (around a fifth of Skyís circa 13 million subs) are potential targets.

My favourite slide at the Sky Q launch last month came from chief marketing officer Stephen van Rooyen. He outlined the 2016 Sky portfolio as: Pay Lite (Now TV); Pay (Sky+ HD and Sky Go); and Pay Premium (Sky Q). He compared the TV offerings to other multi-tiered brands like Diageo with its Blue, Black and Red Label Johnnie Walker whiskies, and BMW with its Rolls Royce, BMW 3 & 7 Series and Mini.

Now TV is clearly the Mini and Sky Q is the Rolls Royce, right? Not exactly, says Van Rooyen. Now TV is the Mini but Sky Q is more the top end of the BMW range. I guess that leaves headroom for something beyond Sky Q, like a set-top box with AI tech?

Getting market segmentation right is vital because pleasing the purchaser has never been more important. Look at how Netflix was able to take the US by storm, partly because pay-TV customers (who make up more than 85% of the TV universe in America) had been so badly treated.

Sky Q is an interesting development because itís not scared to use the word Ďpremiumí. But as Sky continues to broaden its product line, it has also de-emphasised ARPU (average revenue per user) as a key performance metric, believing that what it loses in ARPU it makes up for with a broader base buying more products.

If, as Apple TV boss Tim Cook says, apps are the future of TV and the mobile phone is where the next generation will watch it, then the Sky tactic is really its move into the world of the quad-play offer (TV, phone, broadband and mobile). BT, with its recent purchase of mobile operator EE, is already in the game, but the jury is still out on whether there is huge demand for a bundled product that combines household purchases like TV and broadband with individual products like mobile phone contracts.

Sky Q is selling itself as more than just another set-top box. Itís being marketed as the too-cool-for-school brand with its Netflix-style EPG and wi-fi boosters to go around the house and provide better broadband connections.

Sky Q is going to make a pretty big splash in the market next year and maybe Sky can make its brand of quad-play work as well. Ultimately, there will be more choice for consumers, and thatís got to be a good thing.

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