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Sky Sports weekly pass is latest weapon in the battle for budget viewers

BSkyB’s decision to further loosen access to its Sky Sports channels with a £10.99 week pass is the latest move to bolster its “pay light” strategy, in a battle for budget customers against rivals including Netflix, Amazon and, to a degree, TalkTalk.

BSkyB is adding the option to its budget internet service, No TV, which 18 months ago broke more than two decades of monthly TV subscription tradition by offering a £9.99 day pass for Sky Sports.

Sky-Sports-014

BSkyB hopes the latest offer will help it makes further inroads into luring the 11m Freeview households with broadband who have been pay-TV refusniks. “There is this new pay-light segment that has emerged and we want to capture it,” says Jo Fox, director of brand and communications for Now TV. “Four out of five Now TV customers have never previously taken a TV package. I think it definitely proves there is a new market emerging from Freeview households and they want to be able to take advantage of new technology and ‘snack’ on TV with a better user experience.”

The aim is to make Now TV more attractive – there are also monthly passes for Sky’s entertainment channels (£4.99) and films (£8.99) – as it squares up to rivals. In May Netflix raised its price £1 to £6.99 a month while Amazon’s service, which previously used the LoveFilm brand, costs £79 for a year, about £6.60 a month.

Richard Broughton, director of broadband at research company IHS, believes the new offer is recognition that Now TV is too pricey. “The main thing Sky is recognising here is that it is facing a bit of an uphill challenge getting consumers to buy into Now TV. Film and entertainment are great but sport has always been the driver. They have pushed Now TV as the more premium alternative to Netflix and Amazon Prime Instant Video, but it has not really been attractive enough to compete.”

Fox rejects this, saying the number of Now TV customers has doubled between the first half of this year and the last six months of 2013. And customers that buy the entertainment pass watch about 30 hours of shows a month, although she refuses to part with any hard figures on customer numbers or revenues.

IHS reckons Now TV has about 300,000 monthly subscriptions, although analysis of Ofcom’s latest communications report suggests a more generous estimate of 600,000. IHS puts Netflix UK at about 2.5m (Ofcom: 2.9m), with breakeven predicted at the end of this year, two years after UK launch. Amazon’s service stands at about 1.4m (Ofcom: 1.3m), with the dip probably due to the scrapping of the well-known LoveFilm brand earlier this year.

“Sky’s ‘pay light’ is doing OK, but maybe not doing as well as potentially they may have hoped,” says Broughton. “The subscription numbers competitors are doing are much better.”

Now TV is available on 50 devices and is also offered as a £9.99 set-top box, now sold through retailers such as Argos and John Lewis, which takes it into the territory of competing with TalkTalk’s TV service. TalkTalk’s TV offering, where customers get a free YouView box and the cheapest TV package is £8.50 plus line rental, has been a runaway success in the “pay light” battle, attracting more than 1.1 million customers in less than 18 months.

Tristia Clarke, managing director, consumer, at TalkTalk, says TalkTalk is “really not in the game of moving into premium. We are by definition targeting customers on a budget, so it is [pay-TV] toe in the water people.”

Now TV is available on the TalkTalk TV service, and Clarke says she is “quite keen on it” and does not particularly see it as a rival. Overall, she adds, about 25% of the 1.1 million customer base, about 275,000, regularly choose to take an additional pay-TV “booster” – from £5 for a kids’ or entertainment channel pack to £30 for Sky Sports. Just 2%, or 22,000, opt for Sky Sports Icas Network.

Now that BSkyB has almost exhausted its core market of customers willing to pay for monthly TV subscription packages, Now TV’s purpose has been to keep the TV subscribers rolling in. Over the last year BSkyB added 264,000 TV customers, its best result since 2010, fuelled by the cheaper internet TV signups to Now TV.

“The Now TV brand is getting stronger and I’m comfortable with the momentum,” says Fox, who notes that the rate of growth has not begun to taper. “I think we have a very strong offering, packaged in an agile way our customers like.”

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