Kate Bulkley, Media Analyst.

Sky eyes some VoD Net gains

By Kate Bulkley

Broadcast News

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For Broadcast March 15, 2012

BSkyB initiative shows growing value of VoD, says Kate Bulkley.

Will it be called Skyflix or maybe LoveSky? Will it launch in April or later? Has it been conceived as a Netflix killer or is it a new way to attract more budget-conscious subscribers to Sky?

There are plenty of questions around BSkyB’s move into the online service space, but there are two certainties: whatever the name, whenever the launch date and without knowing exactly how Sky prioritises the reasons for it, BSkyB will begin an online TV service very soon – and it is big news.

The entry of US online movie and TV service Netflix into the UK has sparked a multimillion-pound marketing and VoD rights acquisition battle with Lovefilm and, soon, Sky’s offer, which I will call Skyflix (LoveSky seems a bit too OTT, get it?).

Skyflix is a smart move. Netflix is threatening to lure subscribers to a budget pay-TV option far below the £20 BSkyB entry point package. With Amazon-owned Lovefilm joining in the price-cutting, a Sky response became a matter of when, rather than if.

The folks at Isleworth have always offered a premium service, but as Sky heads beyond 10 million subs and the top-line subscriber growth slows, management is keen to widen the net. That means an anticipated price point of say £10-12 a month – but even that would be double that of Netflix and Lovefilm, and Sky would have to ensure current subscribers didn’t ‘spin down’ to the cheaper service.

It’s also important to keep OTT services and online catch-up in general in perspective: figures from IHS Screen Digest predict the UK’s total 2011 VoD viewing at just 3.6% of total TV watching, and that includes user-generated content on sites like YouTube.

Only when time-shifted viewing on PVRs like Virgin Media’s Tivo, Sky+ and Freeview+ are added to the growth forecasts does the percentage of non-linear TV viewing double by 2015 to at least 12%.

So what is all the fuss about? If you delve deeper into the figures, the move towards flexi-linear – a term coined by Toby Syfret at Enders Analysis – reveals that a disproportionate amount of primetime shows are watched in this way. Live is still key for big events like The X Factor or live sport, but this is not necessarily the case for other primetime shows.

No wonder Channel 4 has decided to launch its own linear version of time-shifted TV viewing with a new seven-day catch-up channel that will be scheduled based on audience buzz as much as what C4 controllers want to see repeated.

As a traditional linear TV channel, it will be positioned to attract linear TV ad rates as well. But that’s not to say VoD revenues aren’t growing rapidly. The online TV and movie market should more than double over the next five years to reach an estimated £690m by 2015, according to IHS Screen Digest, against an estimated TV ad market at that time of £3.8bn and a pay-TV market worth £7bn.

That battleground will mean 2012 will likely prove an interesting – and expensive – year for Netflix and Lovefilm as they try to outmanoeuvre one another. Sky can only hope that its subscribers – both potential and current – will ‘LoveSky’.

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