Price rise a risky move by Sky

Subscribers could leave for cheaper services such as Netflix and Lightbox.

One analyst doubts Sky's sports package price rise will result in a significant loss of subscribers. After all, the Rugby World Cup is coming. Photo / NZME.
One analyst doubts Sky’s sports package price rise will result in a significant loss of subscribers. After all, the Rugby World Cup is coming. Photo / NZME.

Sky TV has said « damn the torpedoes » and gone ahead with its regular autumn price rise, despite competitors trying to lure customers with free trials. The move may encourage subscribers to leave for cheaper services such as Netflix, Spark’s Lightbox and Sky’s own subscription video-on-demand service, Neon.

Sky announced yesterday that it was increasing the basic package by $1.15, to $49.22 a month, and the sports package by $1.61 to $28.29.

Prices usually go up at this time of year, and, let’s face it, the amounts are small change.

But it is still a brazen move when Sky’s prices are already an issue and we are in the first days of a competitive pay TV market.

Sky needs to meet profit targets to keep investors happy. It says it is being hit with higher costs for content and the product is still worth it.

But the price rise is a gamble, and the next set of results will reveal whether it affects « churn » – the proportion of subscribers dropping the service.

Some of us are comparing our big monthly outlays for Sky with the new video-on-demand alternatives costing a fraction of the price.

However, Forsyth Barr analyst Blair Galpin doubts the price rise will cause a significant increase in churn. After all, about two-thirds of Sky subscribers buy the sports package and the Rugby World Cup is coming.

There are no price rises for the movie package or premium channels such as SoHo and Rialto, which face the most competition from the new players. The movie package is being upgraded but in my opinion it has always been the weak spot for Sky.

Despite the arrival of the Coliseum sports service, which is linked to Lightbox, Sky’s dominance of sports rights is still a trump card. The new My Sky service – linked to the internet – will provide much more archive material and better value for money.

But until the upgraded My Sky starts in July, Sky TV is in a vulnerable spot as it tries to hold on to movie and drama lovers.

New competitors Lightbox and Netflix are short on top-end content at the moment, but they are vowing to improve.

Killing Campbell

To close Campbell Live, given its lofty heights in the ratings, would be risky and counter-productive - which is not to say it won't happen. Photo / Greg Bowker
To close Campbell Live, given its lofty heights in the ratings, would be risky and counter-productive – which is not to say it won’t happen. Photo / Greg Bowker

MediaWorks executives met this week but I expect the company will soon end its review of Campbell Live and extend its run to the end of the year.

The company has been outfoxed by John Campbell and the extraordinary public campaign to keep the show on air, largely because the issue was mismanaged at TV3.

As some hail the TV host as a folk hero, MediaWorks has avoided talking about the show’s amazing popularity boost for « legal reasons ». All round, it has been a farce and further damaged morale at TV3.

To close Campbell Live, given its lofty heights in the ratings, would be risky and counter-productive – which is not to say it won’t happen.

Whatever the « legal » barriers, it is worth reflecting on the show’s ratings rise, not least the fact that it is happening during a marketing blackout by MediaWorks.

The rise is so astonishing that it is tempting to see it as reflecting some foible in the ratings system. Another sidelight is the amazing good public relations the whole issue has delivered for the AC Nielsen people meter ratings.

Campaigners for public television have long dismissed TV ratings as questionable at best. In this case, though, it seems the ratings have reflected a dramatic change in the audience after the grassroots campaign to save the show.

That indicates there is at least some relationship between the ratings and the numbers actually watching the show. Have Campbell Live fans really been hiding in the closet, and now they’re out, how long will they hang around?

Online video

Video is flooding into online marketing and advertising, but Marketing Association chairman Ben Goodale says it will never replace the special power of the still image.

« I still think there is a role for still photos. A moment in time is still important – it’s like a champagne cork popping. You don’t really want to watch for five seconds or a minute what you can see in a second, and you can’t underestimate the power of great photography in advertising, » he says.

The reality, though, is that consumers are demanding more video online, including in advertising, and especially in the retail sector.

The reality, though, is that consumers are demanding more video online, including in advertising, and especially in the retail sector.

Goodale is chief executive of .99 – with Ogilvy, the biggest retail-focused advertising agency – which has a big production arm, making video, audio and print advertising.

He estimates that .99 is now making about 10 times as much video as it was two years ago – running on websites and on social media such as Facebook. Agencies like .99 make content for their own clients, alongside the more expensive TV commercials with higher production values.

DDB advertising chief executive Justin Mowday says a lot of video and interactive advertising can be costly, and he doubts advertising agencies are making a lot of money from these ads to smaller, fragmented markets.

But there is a welter of players around Auckland, from two-man operations to boutique ad agencies, making short videos for smaller companies. Publishers such as NZME., owner of the Herald, also say video services are on the radar.

The bigger agencies such as .99 point to their wider knowledge of clients’ brands as a key advantage, and the quality of online video advertising varies widely.

Many advertisers question whether it represents value for money, not only as regards the cost of production, but also the return on investment. There are also questions about how much of a video viewers have to watch before it is collated as a hit, and there is a lot more work to be done, says Advertisers Association chief executive Lindsay Mouat.

Retail video

Retailers are front and centre in the push for more video in online marketing, especially on mobile devices. Retailers Association chief executive Mark Johnstone says that while many big retailers are advanced in the push to mobile, smaller retailers are finding it best not to have their whole inventory online, with « an all-singing, all-dancing e-commerce » website.

« Our advice is they need to embrace mobile because customers expect them to be operating in that omni-channel environment, because about 70 to 80 per cent of traffic now is on a mobile device – smartphones or tablets. There are several price comparison engines up there including one on the Warehouse app, but even for the big retailers there is still a long way to go.

« The big future is for ‘click and collect’, where people select and sometimes pay online, then collect their purchase at a bricks and mortar store. The Warehouse is offering it – Rod Duke and the team at Briscoes are looking at it, especially for Rebel Sport. Click and collect requires retailers to offer a site with e-commerce capabilities, but the cost is coming down all the time. »

NZ Herald

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