Sky’s Now TV throws down the gauntlet to online video providers and low cost operator bundles alike, adding broadband internet and telephony services to their Now TV offer. The service which will launch in early July features a new streaming box which, like previous devices, is made by long term partner and part subsidiary; Roku. The slightly larger DMA is now capable of 1080p streaming, comes with a digital tuner for terrestrial broadcast, and adds live pause capabilities. Outside bundles, the box will cost around £40 at launch. Broadband WiFi for the home is provided by a new Now TV router, styled to match the design of the streaming box. The updated Now TV box adds significant functionality to the old, albeit at the cost of making the device significantly larger. However for consumers who still prefer the small scale (or do not use terrestrial broadcast), the older box will continue to be available.
Uniquely for an online TV service, this product offers a range of bundled broadband and telephony options. These range from basic bb and ‘pay as you go’ calls (£9.99 + line rental £17.99) to fibre broadband and calls packages (£26 + line rental £17.99). Even more uniquely if customers pay the installation cost of £40, and do not choose any of the 12 month bundled options, broadband and calls can be cancelled at any time, as with the TV packages.
The addition of fixed line products to the Now TV offer furthers the segregation between it, and the single VOD catalogue design of rival services from Netflix and Amazon. The ability to play more big drama and sport through a tiny streaming box was always an attractive proposition, while the addition of fixed products mean that Now TV is even more convenient for consumers looking to manage their entertainment needs easily with a single contract. Monthly contracts to both BB and Telephony add a new dimension to short contract service hopping. However it is expected that a minority of customers will take advantage of short term contracts, instead opting for cheaper fixed length contracts, also available from Now TV.
Broadband and telephony offers in the UK are broadly similar regardless of provider, with a contract from BT costing consumers around £30 a month, and the new offer from Now TV £27.98. In the recent past successful customer acquisition has been achieved through the bundling of additional content and offers, such as BT Sport channels. In this respect Sky is using flexibility as their ‘value add’ to sway consumers needing short term contracts to their cause.
The addition of the terrestrial receiver to the streaming box also moves the offer from youview complimentary, to one that directly challenges bundles from TalkTalk and BT. Gaining access to the full range of products in this market subset makes sense, as so many of these subscribers take additional SVoD services. It’s these subscribers that are likely to be most swayed, taking advantage of the savings offered by the bigger bundles, and are likely to tie themselves into 12 month contracts.
Online TV offers have struggled to get consumers to pay more than a low £5-7 monthly subscription fee for access to products, indeed consumers have come to expect subscriptions at this price. Initially this has not been a major problem as companies launched into markets with low cost VoD rights, which at the time saw limited utilisation, and as new market entrants they have enjoyed extremely fast organic growth. However, as these markets mature companies will face difficulties in showing the same strong growth that investors have come to expect from them. Triple play has been a useful tool for operators in the past to increase ARPU’s generated from single customers. By bundling a flexible contract with these additional services Sky has created both an attractive consumer proposition which could draw consumers away from rival services, and addressed the low ARPUs which plague online TV services. With the anticipated launch of Sky’s mobile service, expect this to be introduced into the Sky spectrum of cheaper monthly Now TV products and more premium traditional contract Sky Branded ones.