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Death of the satellite dish is nigh as Sky eyes an online future

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·7-min read
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Sky satellite dish
Sky satellite dish

Dana Strong was defending her corner as she prepared to beckon Sky into a new age.

On her first outing as the new boss of the pay-TV provider, the former Comcast executive gave a bullish appraisal of its ability to survive against the giants including Amazon.

“Our industry is incredibly resilient and adaptable,” she said in an interview at last month’s Royal Television Society Convention in Cambridge.

“The level of innovation gives me enormous confidence. Despite all the rumoured demise in the press, the big brands are all still standing and growing. Viewership is growing, the values of these companies are going up.”

Following a quiet introduction to Britain’s biggest satellite TV company since joining in January, Strong is now poised to act.

On Thursday, Sky is expected to pull back the curtain on a series of tech innovations that could reshape the company for years to come.

It could provide the biggest signal yet that the company is preparing for life without the humble satellite dish – a technology that shook the foundations of the British television market more than three decades ago under media magnate Rupert Murdoch.

Speculation is mounting that Strong will launch plans to bring a new internet television service (IPTV) to the UK, and unveil a new range of smart TVs to protect its turf from the welter of on-demand video services arriving on British shores.

Dana Strong
Dana Strong

For Strong - a former Virgin Media and Liberty Global executive who took the helm following a stint at Sky’s American owner – such plays come with risks.

Not only does it put the British behemoth on a war footing with tech manufacturing giants Samsung and LG, but it also ruts it up against Amazon. They would be the two newest entrants into the smart TV market.

The shift would mark a departure from the low profile Sky has cut since being subsumed into cable giant Comcast three years ago.

Strong will be eager to make a big splash, building upon the rich legacy of her predecessor Jeremy Darroch, but squaring up to Jeff Bezos in the technology market may prove one step too far.

With a 28pc jump in sales to $5.2bn (£3.8bn) in the second quarter, but a 25pc fall in profit to $560m, Sky has the chance to re-channel the energy of the Murdoch era when he proved UK households would pay for satellite TV on top of the channels provided by the licence fee.

Satellite dishes became a common sight on the walls of UK homes from the 1990s - Martin Pope
Satellite dishes became a common sight on the walls of UK homes from the 1990s - Martin Pope

Swept up in streamers' current

Yet Strong’s play reads less like a disruptive push to capture more customers and more like a defensive move as satellite makes way for streaming.

The company is reportedly set to announce Sky Glass, a smart TV with an integrated internet TV service that has the potential to include the full Sky satellite offer.

It will be available in three sizes – 43, 55 and 65 inches – according to the internet trade website ISPreview – and will come with a built-in Dolby Atmos soundbar as well as a separate device called a "Puck", a type of TV streaming device. The 43 inch set is expected to cost about £650.

Clues of how Strong may seek to roll out the IPTV service in the UK can be gleaned from the broadcaster’s approach to the Italian, Austrian and German markets, where it has launched IP services as an alternative, rather than a replacement, to its traditional satellite service.

The Telegraph understands that recent deals with public service broadcasters such as the BBC, Channel 4 and ITV have helped clear the way for the launch of IPTV in the UK.

Easing concerns over the threat of re-transmission fees have also helped.

The issue was a flash point for ITV and Virgin Media five years ago when Britain’s biggest commercial broadcaster demanded tens of millions of pounds from Virgin Media to host its stable of channels. The two parties are now close to sealing a new three-year deal over the payments.

The fresh steps will prove more revolutionary than Sky’s attempts to adapt and partner with streaming services in a bid to survive the threats to satellite TV.

Sky Go, the online TV service launched as "Sky by Broadband" 15 years ago, took the service out of the home and made it available on computers and smartphones as long as customers had an internet connection. It gave the freedom to watch on the move and provided flexibility society has come to expect from streaming apps nearly six years before Netflix muscled its way into the UK market.

Yet Sky Go only forms one plank of a broader strategy to prevent its 23m customers across Europe from cutting their ties in favour of cherry-picking subscriptions with streaming rivals.

Smart move

Now TV, a subscription streaming app that operates as a pared back version of TV service, was launched nine years ago to cannibalise its own satellite TV customers rather than risk jumping ship to Netflix or Amazon Prime Video.

Sky is also laying the groundwork for a wave of exclusive shows through the creation of a new TV and movie studio at Elstree in Hertfordshire to help the broadcaster compete against original content by Netflix and other streaming services.

The biggest tool in Sky’s armoury has come from its ability to strike deals that have brought the streamers into the Sky fold. It offers Netflix, Amazon Prime Video, Disney+ and is preparing to provide Comcast’s streaming service Peacock, to customers through a single Sky subscription.

Efforts were made to cement this position in August when it partnered with Channel 5 owner ViacomCBS to launch SkyShowtime, a streaming service featuring content from the likes of Sky and Universal Pictures to European customers outside of the UK.

Despite the many changes, sources say Sky plans to protect its premium satellite product Sky Q by ensuring customers wanting to pause and rewind live TV will only be able to do so through its existing service.

Sky Studios Elstree
Sky Studios Elstree

This desire to shield Sky Q suggests Sky may seek to make such a bold transition slowly.

James Barford, of Enders Analysis, said there will come a point when the fixed cost of satellite deployment outweighs the income from customers, but that was still “many years away”.

“There is a good example in Spain where Telefonica – the BT of Spain – had an IPTV service. It merged with Canal Plus’s Spanish satellite TV service in 2015. It brought across all the content and immediately shifted the focus to IPTV. After they merged it was about 37pc satellite. But five years later, satellite still has an 11pc share with around 400,000 customers.”

While Strong has a solid customer base in which to mount her push into IP integrated SmartTVs, she won’t have the luxury of having the market to herself.

Virgin Media plans to launch its first IPTV offer by the end of the year as the cable giant seeks to overhaul its offer. Amazon, however, will be a bigger worry. The online giant’s branded Smart TV will reach the American market on October 27 with a webcam and its Alexa smart speaker service, which could challenge the allegiance of Sky customers.

As the tale goes, it was Brian Roberts’ chat with a London cabbie that helped convince the Comcast chief executive that Sky’s technology made it worth the punchy £30bn price tag three years ago.

Roberts will be hoping his decision to install Strong will ensure Sky does not fall by the wayside as streaming wars open up a fresh front on the screens of Europe’s smart TVs.

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