Article

Dror Ginzberg
Dror Ginzberg 20 March 2018

The long, slow, carefully-managed death of satellite TV

Three decades after it first launched in the UK, is the writing - like the dishes it depends on - finally on the wall for satellite broadcasting? In January, Sky CEO Jeremy Darroch said the company would launch a dish-less service, over IP. For a company long regarded as a technology trailblazer, that move was only to be expected - and is now absolutely necessary.

Online video viewing, on-demand consumption and over-the-top TV access have boomed in recent years, whilst subscription VOD services like Netflix are building empires on content without owning the means of distribution. For Sky to keep apace, it must reinvent itself again.

The launch of satellite TV was era-defining. For a generation reared on Arthur C. Clarke’s orbital predictions and the spectre of the US’ “Star Wars” defence programme, satellite was the zeitgeist. And, over the years, Sky has defied all the early sceptics who warned that, in the UK, so enamoured with public service broadcasting, pay-TV would never take off.

For a time, it seemed like Sky’s satellite dreams could not be punctured. In 2010, the company celebrated reaching its 10 million-customer milestone.

But, whilst the mark has since been farther exceeded, the growth outlook now is less rosy. Average revenue per user (ARPU) peaked between 2015 and 2017, and began shrinking in the last few months.

Sky saw all this coming. In 2012, it invested in Roky, the fledgeling maker of lightweight, easy-to-use internet TV boxes that could carry all-comers’ apps and which were a world away from the clunky analogue set-top boxes TV subscribers were used to.

When it spent the next year - and £30 million - creating Now TV to run on the boxes, many people scratched their heads. Here was the satellite subscription specialist offering its most prized programming - sports and movies - outside of its precious bundle to all and sundry, for a flexible monthly fee.

But that was exactly the point. Now TV was never a final destination. For Sky, it was always the journey - the vehicle through which to learn about OTT pricing dynamics, consumer behaviour, the Trojan Horse through which to cut its own cord.

Internet-delivered services all give consumers, who tend to gravitate toward a combination of cheaper and better that is increasingly available, a net benefit.

In the intervening years, Now TV’s growth has blossomed - but that of Netflix and Amazon Prime Video, which don’t depend on patronage from an owner which owns the broadband pipes, has rocketed.

By that comparison, Sky’s satellite heritage looks anachronistic. More than that, it is expensive. Installing and maintaining a vast network of dishes on customers’ homes - not to mention keeping the broadcasting satellites in orbit - takes tremendous capital expenditure.

Furthermore, with an eye on plateauing consumer growth, Sky now needs to look for new subscribers in new places.

With a record 75% of Europeans estimated to live in urban areas by 2020, space and restrictions on altering rented accommodation - which has long put satellite out of reach for many apartment-dwellers - need to be overcome. And they can. Wire-line broadband may not be as sexy as beaming content from space - but it is infinitely more deployable, cost-effective and can help Sky bring its services to tens of thousands of new customers.

The time has come for Sky to flip the switch. But, just as Now TV has demonstrated, don’t expect it to do so quickly, and not, even, in its largest market.

Having previously launched a Sky-branded, Now TV-like service in Spain last year, Sky will first offer a satellite-free offering to customers who already take satellite service in Italy and Austria. There, subscriber churn has crept up lately, and a wired broadcast channel will allow Sky to court a new wave of customers.

The continental roll-outs will allow Sky to learn plenty about offering what appears to be an offer competitive with its historic cash cow. That learning is what will provide the foundation for Sky, ultimately, to go dish-free in the UK.

Online video accounts for over two-thirds of all global internet traffic currently, and this is expected to jump to an unprecedented 82% by 2020, according to Cisco. The day is looming when TV accounts for an even larger majority of traffic.

If not up in the air, where will Sky be in a decade’s time? More profitable and more readily able to compete with rivals like Netflix, more of a content company than an infrastructure provider.

Peter Cressey
Peter Cressey

This is a great article, I have no doubt Sky will remain a disruptive company and stay ahead of the curve - NowTV has crucial USPs over Netflix - including live sky and all of its channels. Companies NEED to be disruptive to survive.

The next decade will certainly be very interesting.

In the 5th paragraph, did you mean Roku, not Roky?

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