Market Insight

Sky launches online streaming service in Spain

September 11, 2017

Irina Kornilova Irina Kornilova Manager – Research & Analysis, Broadband Media, IHS Markit

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Sky has launched an online streaming service in Spain - the first time it has launched in a country where it does not already operate pay TV channels.  Today's launch, first revealed by Sky in July, offers TV series and films for €10 a month after a month’s free trial without the need for a contract. The offer includes on-demand content as well as 12 pay TV channels on a linear basis, including Fox, Disney Junior, Nickelodeon, TCM, Comedy Central and National Geographic.

Sky TV boxes, powered by Roku, will cost €25, with the app installed at launch. The app will be downloadable in iOS and Android, but will not be compatible with Chromecast. Sky is currently working on compatibility with smart TVs. 

The launch offering includes a total of 61 series, including 14 full series including The Walking Dead, The Shield and Failling Skies in full as well as 258 films. Sky's original productions will not be available at launch and content is not in 4K 

Our analysis

The Sky Spain launch marks another move for the pay TV platform outside its core five territories, following this month's launch of Sky Sports in Switzerland and its investment in the fast-growing Asian on-demand platform iflix. However, the content proposition - lacking exclusive or original content and no sports - is weak.

Unlike virtual pay TV offers by Sky in the UK, Germany and Italy, Sky Spain offers its users only one package combining both TV and movie content, including access to 12 pay TV channels. The Spanish offer is significantly cheaper than Sky’s OTT propositions in other European countries. For instance, users of Now TV in Italy are able to choose between a €6.99 mobile-access offering with TV content only and a €9.99 per ticket offer (choosing from Cinema, TV Series and Entertainment TV packages) for access across all available devices. In the UK, customers have a choice of four monthly packages: the Entertainment Pass (access to TV shows and 11 pay TV channels) at £7.99 (€8.80) a month, the Sky Cinema Pass priced at £9.99 (€11), the Kids Pass at £2.99 (€3.30) and a monthly Sky Sports pass at £33.99 (€37.44).

The current proposition offered by Sky Spain includes kids content from Disney Junior, Disney XD and Nickelodeon, Cartoon Network.

One of the key reasons behind the financially attractive Spanish offer is likely to be the lack of content. Sky currently does not have any exclusive movie and premium drama rights in Spain, which leaves Sky with a fairly mediocre library. Sky Spain’s offer does not mention any sports content, as most major rights, notably football, are split between BeinSports and Telefonica in Spain.  

Sky is stepping into a very competitive market divided between international and local players. Netflix launched in Spain almost two years ago in October 2015, and has since become a prominent player with over 600,000 paying subscribers at the end of 2016, thanks to its strong content line up, including original Spanish-language content, and pay TV partnerships. HBO España entered an already competitive market in late 2016, followed closely by Amazon. Netflix’s offer starts at €7.99 for SD quality, Amazon Prime Video at €5.99, while HBO España is priced at €7.99.

Sky’s virtual pay TV operation is in direct competition with Telefonica, a traditional pay TV operator with strong content propositions across genres that provides its pay TV customers with a value-add multiscreen service, Movistar Go. Telefonica has recently increased its investment in original content, with six to eight original series airing a year. BeinConnect, Mediapro's TV and sport channels platform, offers nine pay TV channels (heavily overlapping with Sky’s offer) in addition to four football channels, is also a key player in the market.   

Competition for eyeballs, especially for TV content, comes from local FTA broadcasters. Mediaset with Mitele and Atresmedia with Atresplayer have both invested heavily in their catch-up platforms. Comscore reported an average 77 million video views per month for Mediaset and 66 million for Atresmedia this year. 

Pay TV penetration is 32%, one of the lowest levels among Western European markets, which Sky considers an opportunity for expansion with the hope of bypassing traditional players. Although the headroom for OTT players appears high with 70% of Spanish households having broadband access by the end of 2017, pay TV operators have long struggled due to a reluctance to spend. Unless Sky finds a way to enrich its library of content offerings, through content acquisitions or partnerships with both traditional and online channels, the commercial success is far from guaranteed.

Geography
Spain
Research by Market
Media & Advertising
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