Now TV and Sky’s new direction

Sky’s launch of Now TV, the over-the-top service that is set to include Sky TV programming later this year, constitutes a further example of a change of strategy at BSkyB.

The move from binding, all-encompassing contracts towards an increasingly flexible, pay-as-you-go structure with Sky Anytime is indicative of a company looking to move beyond its pay TV origins.

The success of video-on-demand and streaming websites such as Netflix, which has 26 million global subscribers, as well as the added “untapped” audience of 13 million UK households who do not currently use a pay TV service, has clearly driven the launch of Now TV.

As Stephen van Rooyen, managing director of sales and marketing said: “The whole idea is to have something ‘not Sky’, it is purposely designed to attract new customers.

“We are targeting the 13 million non-pay TV households out there with a no commitment, no contract way of delivering Sky content they want in a dip in and dip out way.”

The words of van Rooyen echo those of Strategy Analytics’ Ed Barton, who interpreted the launch of Now TV as an attempt to escape the “constraints” of long-term contract, pay TV.

Now TV certainly fulfills this aim, and will make film content available to an entirely new audience, building on the introductions of Sky Go and Sky Anytime+.

The most affordable current film and TV package costs £37.50, and while the service offered by Now TV is more expensive than rivals Netflix and LoveFilm (at around £5 per month each), it is available for just £15 per month, or on a pay-as-you-go basis for 99p per film or £3.49 for a latest release.

Decipher Consultancy also offered its view on what Now TV means for SkyTV, as well as a table comparing the services of Now TV with rivals Netflix and LoveFilm (pictured below).

Although clearly flexibility is the new buzzword at Sky, Cesar Bachelet, a senior analyst at Analysys Mason argued that the introduction of Now TV is a “calculated risk” as it has the potential to divert customers away from Sky’s pricier pay TV packages.

The diversification of Sky as a whole could threaten to destabilise the dominance the broadcaster has enjoyed in the pay TV market, what Bachelet refers to as a “balancing act” that the company must perfect.

With more content due in the form of Sky Sports, Sky Atlantic, Sky Arts and Sky One programming later this year, customers may be tempted away from the more expensive arrangements – which range from £21.50 to £55 per month – in order to focus on the specific programming they want.

Ted Hall, senior analyst at Informa Telecoms and Media argues that while Now TV is a risky move, it could prove to be exactly what customers of existing Sky services have always desired.

“Now TV also represents a potentially dangerous move away from the bundled approach to selling pay TV – the packaging of popular channels with those that are less desirable – towards an a-la-carte model.

“With Sky Movies, and later Sky Sports now available without a basic tier subscription, as well as on a pay-as-you-go basis, consumers are finally being introduced to the cherry-picking model they always wanted; the model operators have typically resisted for fear of disrupting the established economics of pay TV.

“This could lead many to question why they need a traditional subscription when the option to pay for only the content they actually want is available as an OTT alternative.”