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Star Wars leads charge as Sky gears up for an attack on its empire Star Wars leads charge as Sky gears up for an attack on its empire
(5 days later)
Sky’s jewel in its movie deal crown, Star Wars: The Force Awakens, deals with a new threat to the galaxy far, far away. Closer to home, within the media constellation that contains Sky, new threats are emerging to the pan-European broadcaster, and spurring it into action.Sky’s jewel in its movie deal crown, Star Wars: The Force Awakens, deals with a new threat to the galaxy far, far away. Closer to home, within the media constellation that contains Sky, new threats are emerging to the pan-European broadcaster, and spurring it into action.
Earlier this month the company announced Sky Movies would rebrand as Sky Cinema. Days later it announced an investment in eSports. The two moves exemplified twin concerns occupying Sky – cementing its role as a premium pay-TV channel and adapting to new tastes and consumption habits. On paper, Sky’s business has never been healthier. Across the five countries it operates in since its British arm acquired the Sky Deutschland and Sky Italia offshoots (UK, Ireland, Italy, Germany and Austria), it has around 21 million subscribers and annual revenues of about £11bn. It has a combined programming budget of £4.9bn which goes on premium deals such as its recently renewed and extended arrangement with Game of Thrones maker HBO and the retention of rights to show football from Germany’s Bundesliga.Earlier this month the company announced Sky Movies would rebrand as Sky Cinema. Days later it announced an investment in eSports. The two moves exemplified twin concerns occupying Sky – cementing its role as a premium pay-TV channel and adapting to new tastes and consumption habits. On paper, Sky’s business has never been healthier. Across the five countries it operates in since its British arm acquired the Sky Deutschland and Sky Italia offshoots (UK, Ireland, Italy, Germany and Austria), it has around 21 million subscribers and annual revenues of about £11bn. It has a combined programming budget of £4.9bn which goes on premium deals such as its recently renewed and extended arrangement with Game of Thrones maker HBO and the retention of rights to show football from Germany’s Bundesliga.
Recently added to those have been a new licensing deal with CBS Showtime, which allows it to air the Damian Lewis vehicle Billions, and Sky continues to invest in original programming such as Jude Law’s new series The Young Pope. In technology terms it has rolled out its premium home entertainment system Sky Q, and is also extending its telecoms business from broadband into mobile with a tie-up with O2.Recently added to those have been a new licensing deal with CBS Showtime, which allows it to air the Damian Lewis vehicle Billions, and Sky continues to invest in original programming such as Jude Law’s new series The Young Pope. In technology terms it has rolled out its premium home entertainment system Sky Q, and is also extending its telecoms business from broadband into mobile with a tie-up with O2.
Then there is that Sky Cinema rebrand, which will see it air a new premiere every day, including forthcoming films in the world’s biggest blockbuster franchises from Marvel, DC and, of course, Star Wars.Then there is that Sky Cinema rebrand, which will see it air a new premiere every day, including forthcoming films in the world’s biggest blockbuster franchises from Marvel, DC and, of course, Star Wars.
The overarching impression is of a media business in an expansionist, imperial phase. And yet at the unveiling of Sky Cinema there were clear hints that the impetus behind all this activity is as much to do with the threats it faces as its position of strength.The overarching impression is of a media business in an expansionist, imperial phase. And yet at the unveiling of Sky Cinema there were clear hints that the impetus behind all this activity is as much to do with the threats it faces as its position of strength.
“Sky has been kind of known for not really acknowledging the competition,” says Ted Hall, IHS Technology’s television research director, “but it did mention Netflix and Amazon, mainly to point out that Sky has a very strong presence in each of the release windows beyond cinema before Netflix and Amazon get access to movies.“Sky has been kind of known for not really acknowledging the competition,” says Ted Hall, IHS Technology’s television research director, “but it did mention Netflix and Amazon, mainly to point out that Sky has a very strong presence in each of the release windows beyond cinema before Netflix and Amazon get access to movies.
“It did point out that there is some overlap between Sky Movies and Netflix customers – one third of Sky Movies customers also take either Netflix or Amazon. You could spin either way, you could say either Sky’s not doing enough to convince customers it’s a one-stop shop for movies or say these are movie fans and they want access in all kinds of windows.”“It did point out that there is some overlap between Sky Movies and Netflix customers – one third of Sky Movies customers also take either Netflix or Amazon. You could spin either way, you could say either Sky’s not doing enough to convince customers it’s a one-stop shop for movies or say these are movie fans and they want access in all kinds of windows.”
Hall adds: “What Sky’s doing in the UK and other markets is it’s trying to target this lower-end market segment that it wasn’t strong at going after before the arrival of Amazon and Netflix. Its expansion via Now TV and Sky Online was something that was partly motivated by the fact in the UK it was plateauing in terms of traditional pay-TV. It has been a reaction to Amazon and Netflix.”Hall adds: “What Sky’s doing in the UK and other markets is it’s trying to target this lower-end market segment that it wasn’t strong at going after before the arrival of Amazon and Netflix. Its expansion via Now TV and Sky Online was something that was partly motivated by the fact in the UK it was plateauing in terms of traditional pay-TV. It has been a reaction to Amazon and Netflix.”
Sky’s empire is also engaged in fending off the threat from another challenger that is no plucky upstart. BT has provided competition for Premier League rights, pushing up the cost to both of them (and delivering a tidy increase in revenues for football clubs). It has also taken Champions League football away entirely.Sky’s empire is also engaged in fending off the threat from another challenger that is no plucky upstart. BT has provided competition for Premier League rights, pushing up the cost to both of them (and delivering a tidy increase in revenues for football clubs). It has also taken Champions League football away entirely.
“Premium sport is the main pillar of [Sky’s] business,” says Hall. In that context, the move into eSports, though initially small, is interesting. “There has been in the past quite a lot of interest from pay TV in airing these things,” Hall notes. “The problem is it is quite a niche sport, but audiences are getting bigger through services like [video streamer] Twitch. Hopefully Sky can bring their magic to whatever they’re producing and produce some more premium sports content.”“Premium sport is the main pillar of [Sky’s] business,” says Hall. In that context, the move into eSports, though initially small, is interesting. “There has been in the past quite a lot of interest from pay TV in airing these things,” Hall notes. “The problem is it is quite a niche sport, but audiences are getting bigger through services like [video streamer] Twitch. Hopefully Sky can bring their magic to whatever they’re producing and produce some more premium sports content.”
But for all the focus on sport, it’s not where Sky is expanding most rapidly. “The fastest-growing area of cost at Sky is original drama commissions, things like Fortitude, Penny Dreadful,” says its chief operating officer Andrew Griffith. “It’s growing from a smaller base but there will come a point when in terms of spend on original drama, we are spending more than C4 or ITV.”But for all the focus on sport, it’s not where Sky is expanding most rapidly. “The fastest-growing area of cost at Sky is original drama commissions, things like Fortitude, Penny Dreadful,” says its chief operating officer Andrew Griffith. “It’s growing from a smaller base but there will come a point when in terms of spend on original drama, we are spending more than C4 or ITV.”
That investment in original programming mirrors the approach taken by the streaming services to mount their challenge and, in turn, so does Sky’s own investment in Now TV. It remains comparatively small with a predicted 1.2 million customers by the end of this year, compared with the current estimates for UK Amazon and Netflix subscribers, which stand at around 2 million and 5 million respectively.That investment in original programming mirrors the approach taken by the streaming services to mount their challenge and, in turn, so does Sky’s own investment in Now TV. It remains comparatively small with a predicted 1.2 million customers by the end of this year, compared with the current estimates for UK Amazon and Netflix subscribers, which stand at around 2 million and 5 million respectively.
But while at the moment it helps Sky pick up those who do not want to regularly pay for TV or want to watch films on other screens, the next step could significantly widen the frontier across which it is battling its web-based challengers.But while at the moment it helps Sky pick up those who do not want to regularly pay for TV or want to watch films on other screens, the next step could significantly widen the frontier across which it is battling its web-based challengers.
“It’s attracting customers that wouldn’t consider Sky before and who want more flexibility. There is some potential we think for Sky to expand beyond the market it’s in to compete with Netflix and Amazon elsewhere,” explains Hall.“It’s attracting customers that wouldn’t consider Sky before and who want more flexibility. There is some potential we think for Sky to expand beyond the market it’s in to compete with Netflix and Amazon elsewhere,” explains Hall.
Griffith unsurprisingly will not comment about future plans for Now TV, but he says of Amazon and Netflix: “In general these are very complementary products. It’s effectively consumption that took place in DVD moving to a digital world. We see ourselves as differently positioned in the marketplace.”Griffith unsurprisingly will not comment about future plans for Now TV, but he says of Amazon and Netflix: “In general these are very complementary products. It’s effectively consumption that took place in DVD moving to a digital world. We see ourselves as differently positioned in the marketplace.”
As for Sky Cinema, he calls it “the final piece of the jigsaw in aligning our brand proposition across every territory, closing the fact we’ve had a very successful two years of integrating the three businesses.”As for Sky Cinema, he calls it “the final piece of the jigsaw in aligning our brand proposition across every territory, closing the fact we’ve had a very successful two years of integrating the three businesses.”
Sky’s jigsaw map of Europe, with Sky Cinema a new sparkly citadel at its centre, has taken shape. But it’s still keeping a careful watch on the barbarians at the door. Sky’s jigsaw map of Europe, with Sky Cinema a new sparkly citadel at its centre, has taken shape. But it’s still keeping a careful watch on the barbarians at the gates.