Author(s): Paolo Pescatore
Following a raft of rumours, at its latest results presentation Sky confirmed that it plans to enter the Spanish market with an online video service, but it gave no details on the new offering.
Sky's launch into new markets, particularly Spain, is sensible. Results for its fiscal 4Q16/17 underlined that there's far less room for significant subscriber growth in its home market, the UK, where its strategy largely focussed on cross-selling broadband and mobile services to its existing customers. Products like Now TV and the imminent arrival of the Sky Q streaming box clearly represent attempts to target new audiences. Elsewhere, Germany still offers plenty of opportunities for subscriber gains, but Italy continues to present numerous challenges.
There's been an explosion in multiplay services in Spain, with all the leading providers now offering bundles including TV services and luring users with strong discounts ahead of the new football season. The market has also seen the arrival of new online services such as Netflix and HBO.
This points to a growing appetite among Spanish consumers to sign up to Internet-based TV services, an encouraging trend for a new entrant like Sky. The company clearly has the technology assets to succeed. I expect it to launch its Roku-powered set-top box supported by content akin to its Now TV offering in the UK.
Sky has adopted a different brand name for its online video platform in each of its other markets: for example, Sky Ticket in Germany and Sky Online in Italy, which was later renamed Now TV. It's highly likely that it will use a different consumer-facing brand for the new platform in Spain.
It would be foolish to assume that Sky can steamroll into Spain and that success will be guaranteed at launch. On the contrary, the company doesn't have the wealth of local content in this market that it does in the UK and other countries. I expect it to adopt a tailored, personalised and structured approach to the launch and roll-out of the service.
Sky will undoubtedly support its new streaming service with any pan-European content rights it secures by exploiting its existing relationships. Adding to its well-received productions such as Riviera, Sky also announced plans to boost investment in original programming by 25 percent. In time, it would be logical for Sky to seek additional local content as rights become available and depending on initial success for the platform.
I expect Sky to forge local partnerships replicating a proven strategy seen in other markets including Germany and the UK. In Germany, sales of Sky Ticket passes rose by more than 100 percent between its fiscal 1H16/17 and 2H16/17, thanks to deals with Telefonica and mobilcom-debitel.
I wouldn't be surprised to see Sky introduce its new online video platform over the next couple of months, in time for the crucial Christmas trading period. The move represents an important step in the company's quest to be a pan-European provider of pay-TV services. It's an intriguing effort, given that it lacks a strong presence in this market. In my opinion, it'll need long-term investment to raise Sky's profile and acquire broadcasting rights.