Once upon a time, there was a business that was struggling. Changes in the market had seen once- loyal customers moving to cheaper competitors whose range was significantly larger than what this business could offer. Its board and executives scratched their heads, wrung their hands and debated endlessly. Finally, someone had a brilliant idea
“Let’s up our prices, so we don’t lose so much money when people leave us.”
Soon the trickle of customers departing turned into a deluge, and before long hardly anyone was left.
Sadly, the struggling business in this parable could easily be Sky TV. Having seen subscriber numbers shrink as more and more people moved to online alternatives, Sky announced this morning that it was upping its prices.
Making customers pay more is never going be enthusiastically met by the market, yet it seems that Sky chose a particularly bad time to reveal its price increases, as Spark also announced pricing for their new Spark Sports app.
To be fair, the price hike from Sky is not massive, and Sky has not increased charges over the last three years, but in a market where competitors are offering comparable services for a similar or cheaper price, Sky’s announcement seems brave.
On average, Sky’s charges will increase by around 1.9 per cent. Basic package Sky Starter goes from $24.91 to $25.99, while Sky Entertainment increases from $25 to $25.50 and Sky Sport from $29.90 to $31.99. It’s not a huge increase, but it isn’t exactly a great way to retain customers, either.
Sky is also scrapping its HD fee and giving all subscribers access its HD channels. While this translates into a discount of $9.99 of monthly subscriptions, the HD charge was ludicrous from the start, and preposterous given that streaming services make HD their standard, and Netflix can be streamed at 4K.
Therein lies the rub. While Sky ups prices, competitors are offering extremely competitive alternatives. Spark’s pricing for its online sports service (which launches in March) will be $19.99 a month and will consist of “all you can eat” online access to Spark’s sports programming. The initial line-up is to include English Premiere League football, Formula 1 races, NBA basketball and hockey. There will also be a one-month free trial and after that highlights and some replays are still be free.
This isn’t Sky’s first attempt at tweaking pricing. Last year, Sky overhauled and simplified its pricing, making more of its content affordable. This saw Sky reduce the cost of the starter package to $25 per month. They also made it more affordable to add Sky Sports.
Feeling the heat from online competitors, Sky also launched the $15.99-a-month Fan Pass Mobile So Sky Sport channels subscribers could watch the footy on their phones.
While many thought these moves would hit Sky’s ARPU (average revenue per user), the fall-off was only modest, dipping from $76.69 in 2017/18 to just 2018/19 $75.82. That said, Sky is still projecting a loss of 98,000 subscribers through to 2023, which will be a big hit given they currently have over 750,000 customers.
Increased competition in the New Zealand market has seen the cost of content increase as more players bid for broadcasting rights. This was most evident when Sky opted out of bidding for the rights for the rugby world cup, which were won by Spark and TVNZ.
The multi-million-dollar question now becomes this – will Sky subscribers stick around and pay the modest increase, or will they instead choose an online alternative such as Netflix or Spark Sports?