Posted by Richard Matthews, editor-in-chief, BT Vision
No one would accuse Sky of being the shy retiring type. As the retained content agency for BT Vision, BT’s On Demand TV service, we here at Zone are more than aware of Sky’s reputation. Rupert Murdoch’s UK-based pay TV behemoth is renowned for its muscle and its willingness to use it, with an aggresive marketing stance helping to attract more than nine million subscribers to its premium sports and movie packages.
Even writing as an interested observer rather than in my capacity as editor-in-chief of Zone's work for BT, it's hard to imagine any circumstances where the media industry might feel a hint of sympathy for Rupert and his satellite posse. But that's exactly what Ofcom's recent pay TV ruling managed to achieve.
Quick summary: Ofcom is making Sky wholesale its premium sport channels (Sky Sports 1 and 2) to competitors at a lower price, thus inviting the likes of Virgin, Top Up TV and BT to bankroll Premier League football, the big daddy of Pay TV content, on to their platforms. So why the media boo-hooing?
Well, Sky has done nowt wrong by robustly protecting the interests it has developed over 20-plus years of hard work, risk-taking and endeavour. It has thrived in the face of Freeview’s rise (10 million customers) and moved from being on equal pegging with cable suppliers in the late 90s to leaving them behind on a 3-4 million-customer plateau. Is it fair that competitors lobbied the government to look into their dominance and make Sky divvy up their just rewards? Those with vested interest in the moolah Sky pays for its premium privileges (the Premier League for one) have very publicly cried foul, claiming jeopardy for the sports themselves.
Could this mean the end of football as we know it? An end to exorbitant player salaries? To debt-riddled club buyouts? To the Big Four monopoly perpetuated by the absolute need for TV rights cash to pay tens of millions of pounds for the players paid the exorbitant salaries? An end to high cost TV subscription as the only alternative to watching Match Of The Day? Hmm. In all seriousness, it’s like an episode of Lost, with Sky painting Ofcom as the Dharma Initiative sacking their private pay TV island. BT, Virgin and co suddenly look like real competition.
To circumnavigate the sympathy trap, you have to look – if you’ll excuse the pun – at the bigger picture (as well as sift through the 600-odd pages of the report itself). The Ofcom ruling is positioned very close to the launch window of the mysterious Project Canvas, aka “the next stage of digital television”, casting the Sky Sports furore as a short-term storm.
As Steve Hewlett commented in the Media Guardian: “the pay TV review is really about the future of TV”. Internet Protocol TV (accessing the web through your boob tube) is cresting on the horizon, with Canvas and its partners (BBC, ITV, Channel Four, Five, TalkTalk, SeeSaw and BT) at the forefront, making downloadable content the pivot point, content that is likely to be paid-for entertainment. Pay-per-view On Demand content currently has a stigma attached to it that will be diminished as the web becomes increasingly monetized (Murdoch is currently leading the charge by adding subscription charges for his online newspaper brands).
In that scenario, Sky’s virtual monopoly of pay TV becomes problematic for the advancement of the industry as a whole. They’ve even been the aggressor in campaigns to win “bundle” subscribers by targeting BT’s broadband customers – whoever owns the bitstreams will have the power. Now the boot is on the other foot and Sky is the incumbent under pressure.
To use a favourite footie pundit phrase, at the end of the day, the move will allow customers to choose where they watch Sky Sports, with a variety of price points. When did customer choice become so threatening? Sky seem troubled by new players getting a leg-up in the Pay TV world, even though the the market seems plenty big enough for more than one provider, and customers would benefit from both innovation and healthy competition on price.
Sky will make money from any sales of their channel rights, even at the lower Ofcom price point, a fact illustrated by the rise in BSkyB’s share price following the ruling. In fact, the share prices of all affected by the ruling also saw a share spike – dare I suggest that in reality everyone could come out of this a winner? Certainly, this could lead to even more money for the sports bodies to profit from. More outlets means more viewers. The ruling can only be good for customers, allowing even more football fans to be watch the game at a more accessible price point. Why assume any potential audience is going to be split?
Following this glass-half-full outlook, Sky could demonstrate their moxie by using the ruling to spread their brand without any effort on their part – it’ll still be Sky Sports afterall, wherever you watch it. That’s free advertising right there. All their graft and gambles won’t be laid waste by hearty competition. There is room in the market for Sky and robust, emboldened media suppliers like BT Vision, who can use Sky Sports to get the audience share that their excellent service warrants. If anything, it could stimulate market growth. And in today’s post-credit crunch world, that’s the holy grail.
Still feeling sorry for Rupert?