Much of the criticism and complaints about Sky is about pricing and whether it is value for money. In the recent Lightbox survey of those that cancelled in the last 12 months some 40% cited it was too expensive. And of those that altered their package 68% said they did so because it was too expensive.
So how expensive is Sky?
We know from Sky’s annual reports that the average revenue per user (ARPU) is almost $80 per month. [NOTE: the average household that chooses to “cut the cord” is only going to save $80/month – not claimed $100-$150/month or 25% to 87% more than the average subscriber pays as Lightbox would have you believe, but dont let the facts get in the way of a good story]. At $80/month that translates to $2.63 per household per day.
We also know that the average Sky viewer watches about 1 hour of Sky programming per day. http://www.throng.co.nz/2015/11/where-have-all…e-re-revisited/ And that the average household size is 2.7 people [NZ Census 2013] hence the average household consumes 2.7 hours of Sky programming per day. So we’d conclude that the cost per viewing hour is ~$1.00/day.
The economist would define expensive as the point where the utility derived from consuming the good is exceeded by the cost of the good. In other words there are a number of households where the cost of entertainment at $1.00/hour/person is too high. Few people determine this explicitly but we all undertake the same process implicitly. The question is where does perception (of value) meet reality (of value).
Is the Cost Per Viewing Hour high?
Even today you could watch the latest blockbuster at the movies for $18.50 with a CPVH of $7.80 (average length of theatrical release is 142 minutes) and feel your viewing experience was value for money. Or the same blockbuster in Gold Class or equivalent for $35.00 with a CPVH of $14.80 and feel your viewing experience was value for money. Others might find it expensive even at $7.80/hour.
Wired magazine calculated CPVH in 1995. Back then people tended to pay, on average, USD2/hour regardless of the type of media consumed.
The former editor of Wired, Kevin Kelly, updated in 2010 (and also inflation adjusted the 1994 data) with indications that on average households paid USD2.50/hour. Cable TV was about USD2/hour or NZD3/hour (~$1/hour per person).
One could argue for/against converting from USD to NZD but given content costs for broadcasters are predominately USD, equipment costs are USD, and even new media makes an exchange rate adjustment for supplying its content to New Zealand vis a vis the United States. [Note that watching a movie in the US is ~$8.00 compared to NZ’s $18.50]. For arguments sakes one could use the last 15 year average exchange rate of 0.66 [RBNZ Table B1].
Inflation adjustment for cable CPVH from 2010 to today would be USD2.18/hour or NZD3.30/hour (or a little over $1/hour/person).
Comparative Cost Per Viewing Hour in New Zealand
There is a clear distinction between the pay-per-view services and the subscription streaming services. And in the absence of average viewing data for New Zealand for the streaming services we are left with the pay-per-view operators.
Content falls into three broad categories – new release movies, recent release and back catalogue movies and television shows.
New releases are available on a PPV basis on Quickflix, Google and iTunes (and formerly ezyflix). Prices range from $4.99 to $7.99. Given an average movie length of 142 mins this translates to a CPVH of between $2.11 and $3.38.
Back catalogue movies or recent releases are more akin to Sky’s Movie package. Prices range from $2.99 to $6.99 and CVPH ranges from $1.26 to $2.95.
Television shows on a PPV basis range from $2.99 to $3.99. And for a 41-45 minute episode have a high CPVH of $3.99 – $5.32. One could speculate that such a high CVPH explains the very low uptake of services such as Quickflix and Ezyflix relative to the streaming services of Netflix & Lightbox or the advertising funded streaming services of TVNZ OnDemand and 3Now.
||Cost Per Viewing Hour
|New Release Movies
||$4.99 – $7.99
||Average 142 mins
||$2.11 – $3.38
|Recent Release Movies
||$2.99 – $6.99
||Average 142 mins
||$1.26 – $2.95
||$2.99 – $3.99
||Average 142 mins
||$3.99 – $5.32
Comparing NZ Cost-Per-Viewing Hour to US Cost-Per-Viewing Hour
Statistics on CPVH are available from a number of sources. Deutsche Bank published to clients in 2014. Basic cable in the US is 25c per viewing hour (NZ 37 cents) with premium cable at US 35 cents per hour (NZ 53 cents).
Similarly other commentators (David Justus at ContentCurrents.com) have shown US PayTV to cost $0.61/hour per household or 0.23cents per hour per user.
Unfortunately it appears that these statistics are based on watching all television on a cable platform and include retransmission of the networks and their affiliates. It may be that the 233 minutes of watching on the Sky platform (Sky channels plus FTA on Sky) is the equivalent metric of the 5 hours per day of television watching in the US. If this were the case then the apples for apples case is NZD0.25/hour/user for watching television on Sky. However it would be unpalatable for a New Zealand consumer to include paying to watch FTA on Sky as part of the subscription paid to Sky given the free alternative on Freeview.
In the absence of data that excludes viewing of retransmitted channels in the US it is hard to get an accurate comparative figure for the cost of watching pay content on a pay platform.
So one could argue, despite the vitriol and narrative expressed by some commentators (and even competitors) the cost of Sky at ~$1.00/hour seems reasonable value compared to PPV alternatives.
The average Sky viewer watching Sky programming pays $1.00/hour – and it’s up to the individual (or household) to determine whether that has value.