[This blog was originally published for Videonet http://www.v-net.tv/Blog.aspx?id=549&title=cord-what-cord]
One can find many an article on Pay-TV cord-cutting Stateside. Generally speaking there are slightly more compelling alternatives though that are yet to hit the UK, namely the Roku box featuring Netflix, Hulu, the big networks rolling out streaming services (I’ve tried a few via a proxy server, and the quality was excellent IMO).
I am curious how the viewing habits of the younger generation will impact the UK Pay-TV market in particular.
Sky’s 10m target
Five years ago, James Murdoch’s touted his (in)famous to reach the 10-million subscriber mark by the end of this year (I wonder if that’s calendar or financial – it could be important). To their credit, they are getting close, and given Sky’s current solid marketing drive, it would be a blow to the pride (and bonuses) of their strategists if they faltered at the last. With the re-launch of Apple TV and Google around the corner, to name but two, one wonders if the last couple of hundred thousand heads that Sky want (some of whom presumably have held out for so long) are a bridge too far, as they are more and more presented with a slew of good value alternate options. So what is Sky’s attraction and how much does it cost?
Live sport – the prime offering, market effectively sewn up
I maintain that although they would like to promote themselves in more rounded terms, Sky was and is about their prime-rib live sport, specifically football, a bit of an obsession in these Isles. Sky have the handy position of being both distributor and producer here, so they can name terms to release the content to other distributors (within the bounds of fair play of course)
It’s a simple calculation – you won’t get any change from £40/month minimum if you want this content (I’m not talking HD here by the way – add another tenner for that).
VoD – convenient, but good value competition from Lovefilm
A Sky Movies channel bouquet add-on will add another £8/month (but bear in mind the latest releases are Sky Box Office PPV at £4-a-pop). This is bolstered with Sky Anytime, their watch-now add-on delivered over broadband.
However the huge growth of the efficient Lovefilm postal DVD service, in a large part due to their affiliate marketing program and vast catalogue, I believe has seriously dented the appeal of Sky’s movie offering. Additionally, Lovefilm are starting to take small steps with their streaming service on web and selected CE devices.
I won’t argue, a walled garden operator platform is the most convenient way in which to consume TV. One box, one remote, simple. This is bolstered with Sky Anytime, their watch-now add-on delivered over broadband.
If you’re prepared to live without the sport, movies and HD, you still won’t be able to crank the monthly bill down below £19…
Going back to the demographic in focus, let’s take the typical UK graduate. A decade ago, this youth/graduate demographic was easy pickings:
- Relatively small personal debts
- Buoyant economy
- No internet-based content available (no broadband full-stop – what a thought!)
- Blockbuster an annoying 5 minute drive away
So, hooked straight onto a basic Pay-TV package, at the least. Chances are these 30-somethings are still customers.
- £20k of debt
- Ropey job prospects
- Always-on laptop with a mix of purchased and pirated internet-based content (and more where that came from)
- Plenty of free (iPlayer) and micropayment catch-up services (Seesaw) via broadband (and consequently, QoS expectations framed by these services)
- Perhaps LoveFilm on Pay As You Go
Really, how compelling is the Pay-TV offering now that they would commit to a contract?
They adage goes ‘get them when they’re young and you have a customer for life’. In my opinion this is where the big operators are going to suffer. And why they will either have to cut prices to entice newcomers (Sky just raised them) or milk even more revenue from the current subs base (tough in this climate).
As for subscriber churn, an apathetic customer is an operator’s best friend. But this isn’t the uber-competitive broadband or mobile telephony market. If someone leaves Sky, I suspect it’s because they want to save money, not because Virgin Media has a better reputation for customer service.
With a giant axe poised over the public sector in the UK, how long before the ‘apathetic customer’ becomes ‘unemployed and penny-wise customer’?
For me the promise of OTT could start to stir things. How many Pay-TV subscribers are taking the cost hit on a package just in order to get access to some niche interest channel, say National Geographic or Discovery. This is probably the best example of where a Roku-like device could come into the market, and if the price was right at consumer and provider end, could really start shaking things up. Time will tell.