Sky – Why cant I pay for the content that I watch?

But I only want to watch sport and have to pay for the dross I don’t watch

A common thread of discussions is the big bundle that subscribers have to pay for to get access to the coveted sport.  Sadly Sport only accounted for 4.7% of total audience share in 2014 (slightly more than Prime) and only 4.9% in 2013 (equal to Prime).  To put that in perspective that’s a whopping 8 minutes 39 seconds per day per person (1 hour/week) or 23 minutes per household per day (2.7 hours/week).  Ahem – for a nation of rugby addicted sports fanatics.  In 2014 the audience across The Box, Vibe, Jones and Crime & Investigation was greater than Sky Sport 1-4.  So while we claim that we really only want Sky for the Sport – all evidence to the contrary.

Skyminutes

So the basic reality is that despite there being individuals that say that they want just the Sport and complain bitterly that they are required to pay $77.50/month for their sport the average person in the average Sky household is watching a whole lot more than just sport.

Estimation/Speculation on the Cost Per Viewing Hour (CPVH) for Sky components

Recall from our earlier discussion piece that the cost for viewing Sky content in Sky households was $1/hour/person (Sky – When is expensive too expensive).  And given the absence of discussion on the analysis, taken as read.  Trying to add further granularity on the value of the different packages (Sport, Movie, Basic) becomes more of a dark art absent the cold data that only Sky possesses.  But one can estimate (or speculate).

dollarsperhour

To get a better understanding of CPVH across the premium segments we should apportion different aspects across sport, movie and all other channels.  Even in this age one can “rent” a decoder from Sky to get One, 2 and TV3 for $18/mth.  The relative availability of Freeview decoders and PVR’s should reduce this revenue to zero for Sky however it provides a useful data point for apportioning decoder rental across our components.  We use relative viewing time as the mechanism.  Example for 2014:

BoxRental

We have apportioned the HD ticket between the Movies and Sport packages given the primary driver for HD content (at least within Sky’s offering) is likely to be watching either of these packages.  We have again apportioned on the basis of average time spent viewing.  See example for 2014:

HDRental

All other costs other than package costs have, for the ease of simplicity been allocated to watching the residual channels (non movies/sport) on the Sky platform.

We have assumed that 75% of subscribers take Sport (see Herald article from earlier this year http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11467422) which has been relatively static compared to when Sky disclosed package subscription data in its Annual or Interim Reports.

We have assumed that the proportion of Movies subscribers has fallen at 2% per annum since 2010’s last known disclosure.  That is consistent with trends pre-2010.  In 2014 we have estimated that 38% of subscribers take Movies as part of their package.

Sport – the Cost Per Viewing Hour

Aggregating the Monthly price of Sport  and its share of HD and the decoder results in monthly  prices of c$33-37/mth across the 2010-2014 time period.  When analysing the viewing minutes per person on Sport we deduce that the CPVH for Sky Sport has been around $2.65-$3.20 per hour.

Our metrics will be overstated with the number of minutes of ESPN for the timeperiod not being known and thus cost of ESPN included in the numerator but the minutes excluded from the denominator.

 

Looking at comparatives.  We’ll use the NRL as an example of watching a premium sport and paying for the privilege of doing so.    We’ll ignore the cost of carriage (ie data costs of between 0.6Gb and 2.3Gb/hour) given the rapid commoditisation of data.

If you were a miser that squeaked while you walked and subscribed to Livestream, the NRL’s streaming partner in countries where there is some or no broadcast coverage, at Euro60/season (NZD100) and a VPN service, to disguise that you were a NZ viewer circumventing another parties broadcast rights, at $5/mth to watch the Warriors on your 120″ screen then your cost would be $135 for the 30 week (or 7 month period).  This equates to $4.50/week or, assuming you only watch 1 match, $4.50 for your 90 minutes of viewing (including halftime).  Simply put you CPVH would be $~3.00.

Alternatively you could subscribe to FanPass at $300/season or $10/week for your one game.  Simply put your CPVH would be $6.67.

SportCPVH

 

It is obvious that a supporter that only watches their own team is paying a substantial premium to watch one game on the legal streaming service.  And highlights why most sports streaming packages offer a “Supporters” package that hollows out just their teams games, at a fraction of the cost of a full season pass for the codes diehard fans that want to consume every game.  Will FanPass offer a Supporters Package this year?  IMHO it should. 

Movies and the Residual – Cost Per Viewing Hour

Similarly allocating the HD share and decoder share to Movies we find that the CPVH of the Movies on Sky has varied from $3.23-$5.00 over the time period.  Recall from our earlier analysis that PPV pricing of recent releases was $1.25-$2.95/hour.  As such it comes as little surprise to find that the proportion of Sky subscribers taking Movies (and hence viewership) is declining.  Simply adding more Movie channels amid increased prices has not changed uptake or inherent value.

After stripping out the premium aspects of Sport and Movie we can deduce that the residual cost of Sky (the big basic) where the majority of viewing takes place has a CPVH of between 55 cents and 70 cents per person.

SkyCPVH

Hardly an expensive proposition for a platform that continues to grow its audience share and viewing minutes compared to its challenged Free-to-Air counterparts.  In aggregate a Cost Per Viewing Hour of $1/person doesnt seem high but excluding Movies and Sport to find that the content that is actually watched to be only 70 cents per viewing hour makes farce of the claims that pay television is expensive.

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  • Regan Cunliffe

    This CPVH spin is some of the worst, and desperate analysis I’ve ever read.

    You’re arguing against economies of scale where the more you purchase, the cheaper the per item cost should be.

    Of course the CPVH is likely to be higher if you’re only prepared to pay for one thing.

    It’s no different than the person who happily buys a litre of milk for $2.50 vs the person who buys 1000 litres for $1/ltr. One person is paying $2.50 while the other is spending $1000.

    It’s easy to talk about the $1.50 difference in per litre cost while conveniently ignoring the $997.50 difference in spend.

    • Mike

      Please feel free to criticque the numbers and the methodology. Point out any errors.
      CPVH is a valid and used analysis – its been used in the past and even currently. Any economic analysis for price per unit consumed to measure utility seems to be a valid measure for analysis, dont you think?

      However at no stage have I confused wholesale and retail purchase or consumption in my analysis. The unit of measurement here is the individual or household purchasing the same retail product from the same supplier. Your analogy would be better if you used buying 1L of milk at $2.65L vs buying 3L at $1.98L.

      This analysis is about measured spend and measured viewership.
      Where is it not valid??

      If you go to the movies it cost on average $7.40 per hour to watch. Do you go to the movies to watch? How do you justify your spend?
      Will you line up like thousands of others to watch Star Wars? Why do they do it?
      How does any economist measure the value that the viewer obtains?
      How do you propose to measure their utility?

      CONTRIBUTE TO THE HEALTHY DISCUSSION. ISNT THAT THE IDEA????

      • Regan Cunliffe

        Your numbers are as valid as using cume is. Entirely correct but ultimately very misleading when used incorrectly. All you’ve written is vanity analysis based on a methodology that delivers you the best outcome for your bias.

        An economist might like those figures but i doubt anyone makes purchasing decisions around content based on a CPVH basis.

        Whatever way you look at it, in order to get “better bang for your buck”, you still need to spend significantly more than the alternatives.

        • Mike

          Are you also saying that ratings and CPT/M measures for advertisers are invalid? How does an agency or a client measure the value and effectiveness of placing advertising on FTA? Are rating points in total and in demographics meaningless? Would you prefer facebook likes or whether you personally feel the program is worth watching? Are you going to be the arbiter of content that people will watch and the advertising community should trust you rather than measure whether people are watching?

          The method for paying for content for a viewer on paytv is different to that of FTA but ultimately someone is paying and someone needs to measure value for money.

          Feel free to use the analysis in a way that you believe overcomes the “misleading when used incorrectly”. Step up and add value to the discussion. Or would you like to base the argument on whether you personally think something is too expensive?

          At what point does going the movies become too expensive?
          At what point does buying a box set become too expensive?
          At what point does buying an episode on PPV (Apple, Google, Sky, whatever) become too expensive?

          We all undertake the value measure implicitly. Some people measure it explicitly – and this is an example of explicit measure. And everyone has a different viewpoint on where value lies.

        • Mike

          So Regan, you paid your dollars to watch 2 hours and 15 minutes of Star Wars: The Force Awakens.

          Was it worth the $8/hour to watch it? Blast that Disney for allowing such exclusive release through such few outlets with limited seats – why couldnt they just let everyone pay a reasonable price to stream it into their homes? There are thousands of disgruntled New Zealanders that are still waiting to see it. I hope it’s financially worth it for the rights holder. 😉

          Or is it okay for you to pay a premium to watch the premium content when it suits you, but not okay for other people?