IT was only ever a matter of time before BSkyB launched some kind of internet TV service. The insurgent threat of online film streaming products such as Netflix and Lovefilm meant it could not stand idly by.
Details of the service are so far sketchy. We know it will be available over the internet and on other connected devices, such as tablets, phones, games consoles and internet TVs, and that only movies will be available to begin with. Sport and entertainment content will follow at a later date, and we understand that live Premiership football games and new film releases – the Sky crown jewels – will be accessible.
The rationale is simple. Having passed the important 10m subscriber mark, Sky is going to attract new sign-ups at a slower rate. There are 13m customers who don’t have (and probably don’t want) subscription pay TV. If they’re going to buy the odd piece of premium content, Sky would rather be the one selling it to them.
Sky already owns the content and the incremental costs of developing the technology are marginal. But we think there is a real risk of the service cannibalising existing subscription revenues. Price the content too low and the number of subscribers will fall. Too high and no-one will buy it. It’s a tricky one to pull off.
