As Sky boss John Fellet announces his intention to step down, PAT PILCHER ponders what’s needed to transform the broadcaster into a slick digital money-maker.
SKY TV chief executive, John Fellet, has announced his intention to retire, with the broadcaster undertaking a global search to find a replacement CEO. Fellet will remain as CEO until a successor is found. Once the transition is made, Fellet will continue to serve on the SKY board.
The big question in my mind is who’d want the job? Most CEO types are looking for jobs where they can transform a company from a slow dying wreck into a slick money-making venture. While some may argue that Sky currently fits the former, the multi-million dollar question is, what needs to be done to make it the latter?
The company has copped a fair bit of flack over recent times. Some of it is well deserved, some isn’t. Speculation that Amazon might bid for broadcast rights to rugby saw a flurry of negative press, along with a hit to Sky’s share price.
In parallel, customer numbers have continued to trickle away as consumers worked out that it’s cheaper to watch sport at the pub and that Netflix offers similar non-sporting content for much less money.
Adding to Sky’s woes is an increasingly ugly local media environment. Fairfax is shuttering most of their community papers while TVNZ and TV3 slowly grind painfully onwards as Freeview viewers follow the exodus to Netflix and other online services.
Whoever does end up replacing Fellet is going to have their work cut out for them.
Sky are hamstrung on several fronts. Firstly, they are reliant on hugely expensive satellite infrastructure that will most likely struggle to deliver content in 4k HDR given the prohibitive costs of bandwidth. Secondly, while they offer a wide range of content, the real reason many MySky boxes still exist in homes is sport. In short, should SkyTV lose broadcast rights to rugby and cricket, they’ll probably also lose most of their viewers.
Amazon have deep pockets and Sky can ill-afford a bidding war. Last, but by no means least, Sky’s online portfolio is hopelessly muddled, not to mention poorly marketed.
So what does Fellet’s replacement need to fix?
Put simply, a lot needs to change if Sky is to survive. None of these hypothetical changes are easy, but they’re not impossible either.
Diversify – Sky need to make sure they have a reason to exist if they lose the sport. At the moment, their non-sport content mostly consists US/UK and Aussie stuff that can easily be obtained elsewhere for less money.
To combat this, Sky need to start producing local content. And I’m not talking about low budget/low-fi TV3 style reality shows or shouty infomercials that punctuate Freeview’s trashy content with startling regularity either.
There are definite benefits to be had by spending money and creating high quality, compelling NZ content that cannot be had elsewhere.
There’s an obvious benefit to be had by spending money to create high quality, compelling content that can’t be had elsewhere in that it’d give viewers a reason to stick with Sky for reasons other than rugby or cricket, but there’s also a high probability this content would be less likely to be pirated, with an added bonus of earnings from offshore sales too.
Joint Venture – All that good local stuff aside, it costs a bomb to make local content and New Zealand’s viewership is tiny by world standards. Adding to these difficulties, there’s high competition for New Zealand on Air’s have very limited funds.
The solution here is to start developing joint ventures with foreign networks. Many broadcasters/film makers have beaten a path to New Zealand in recent years to use NZ’s scenery as a backdrop for their content (that our production crews are less unionised and cheaper to use by US/UK standards helps too). Partnering to share the cost of content production may be an answer?
Rationalise – At the moment Sky has a messy collection of online brands ranging from Neon through to Sky Go. These are poorly marketed and are largely an afterthought to Sky’s satellite business.
Rationalise these into a single coherent brand and an easy to use portal then aggressively market it/bundle it. Follow this up by building platforms for smart TVs, phones and tablets.
This brings me to my next strategy – Longer term, Sky needs to drop satellite. It’s a hugely expensive dinosaur. Migrating to a mostly online platform may initially involve some short- term costs, but there’s no arguing that going online will help to future-proof Sky as demand for 4K, HDR content grows.
About the only real challenge will be how to service rural NZ who don’t have access to fast broadband. Maybe Sky can make use of their relationship with Vodafone for competitively priced 5G data plans?
Sell smarter – Sky’s existing model for on-demand content hasn’t really been fully exploited even though it makes a lot of sense. There’s no messy subscriptions. This means Sky customers should be able to purchase individual sporting events as a one-off purchase. While the content licensing lawyers at the NZ rugby union and Cricket New Zealand may get a little twitchy as this won’t guarantee them lucrative lolly from ongoing channel subscriptions, Sky can argue that it’d bring a lot more people over to watch sporting events.
It’s also how Amazon and other online players would most likely sell rugby if they were to outbid Sky.
Either way we at Witchdoctor wish Mr Fellet all the best with his pending retirement!