In the age of the connected TV both scale and control of the user experience are vital for the long term success of TV players and platforms. The launch of Sky Glass –Sky’s new Smart TV product delivering content and services over IP– gives Sky a new means to achieve both of these, Ampere Analysis noted in its latest report.
Building scale and control simultaneously can seem contradictory, as scale can be built most quickly by ceding some control over to third parties, as with Disney+ initially launching on Sky Q exclusively to build its UK footprint quickly. The alternative is to prioritize ownership of the user experience while building scale slowly and independently, a more traditional pay TV model that has enabled Sky to build its base of 10 million satellite homes in the UK over more than 20 years.
This control of the user experience has allowed it to build a platform with a wealth of user data to underpin features such as recommendations, personalization, and its own addressable advertising solution: AdSmart from Sky. These features keep users within the Sky environment, allowing the company to protect its base. This in turn attracts content partners which creates a more compelling customer proposition.
With its core satellite pay TV business stagnating, however, Sky’s ability to increase scale and retain control is inhibited. But Sky Glass has the potential to remove both these inhibitions. The TV set itself provides the final barrier to a pay TV provider fully owning the connected TV experience by ceding control to TV manufacturers, who are increasingly focused on driving customers toward their own interface. Sky Glass would ensure the viewing experience remained in Sky’s hands. And in terms of scale, while satellite penetration remains a limiting factor on the number of homes willing and able to adopt Sky, its new Sky Glass product would remove this limit by delivering a service over IP and removing the cost of satellite installation.
“Sky Glass has reaffirmed the company's commitment to building a platform at scale for the connected TV age, and added to this by aggressively bunding OTT services within its platform to take advantage of the shift in user behaviour toward VOD, while simplifying an increasingly complex and fragmented SVOD space,” said Bhavini Gohil, Senior Analyst at Ampere Analysis and the author of the report.
“However, this new proposition has the potential to be prohibitively expensive for the much coveted younger, digital-native audience, with monthly fees starting at £39 a month for a 43” screen and a Sky Ultimate TV subscription, increasing for larger screen sizes. This audience is rapidly moving away from linear viewing behaviours central to the pay TV proposition in favour of VOD viewing, and already has a high uptake of low cost OTT devices which support this viewing behaviour. Furthermore, with the TV replacement cycle lasting anywhere up to ten years, building scale with this base will take a long time. Sky, though, looks ready to play the long game to futureproof its base,” Gohil concluded.
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