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Sky UK Adds A Premium Pay-TV Tier

Sky Q, a new pay-TV offering marketed as a ‘next-generation home entertainment system’ by its architect Sky UK, went on sale Feb. 9, marking out a new premium tier within Sky’s product portfolio.

Sky, a global bellwether for pay-TV and broadband distribution, has a reputation for developing well-defined and easy-to use products, driven by analytics and content depth across both linear channels and OTT.

This strategy has helped grow subs despite Netflix’s UK launch four years ago and aggressive competition from domestic rivals, BT and Virgin.

Asian pay-TV and broadband businesses are taking note, in both developed economies (i.e. Malaysia, Singapore) as well as emerging markets (i.e. India).

Sky UK had 12.3 million subs (including pay-TV, OTT and broadband) at the end of Dec. 2015, representing a healthy 5% average annual growth over the past three years.

Sky Q offers enhanced connectivity and viewing options across multiple devices (see slideshow below), with prices starting at £42 (US$60) per month. Customers can pay extra for movie and sports bundles, as well as for more recording capacity and multi-room services.

A broader product range

Sky Q becomes Sky’s third go-to-market platform, after streaming option Now TV and existing pay-TV offering, Sky+.

“When I first joined Sky 12 years ago, we had 93% of people on top-tier TV who largely had a DigiBox,” Sky CEO Jeremy Darroch (pictured) remarked on the company’s Q2 earnings call.

“We had a product called Sky+ that we weren't doing anything with, and you thought, that’s pretty narrow,” Darroch added.

“Sky has transformed that, and I think that's broadly applicable across Europe. If we can get it right, and it's our job to get it right and to get those numbers to work, I like that deck of cards."

Sky Q will incur about £30 million (US$43 million) worth of start-up costs this year. The product could generate positive returns within 12-24 months for existing and new customers.

The service could also lead to incremental benefits, including additional fees for smart features and broadband upgrades as well as from upselling across channel packages.

Any extra viewing will also boost inventory for Sky’s ad targeting tool, AdSmart, as well as transactional revenues (e.g. customers buying UHD on-demand movies).

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