A glimpse behind the scenes at Spark's Lightbox

(UPDATE: On Spark's earnings conference call, the company said it was aiming for 70,000 Lightbox subscribers by June 2015. Although the service will be open to those on any ISP, there will be some kind of special deal for Spark customers, CEO Simon Moutter said. Details won't be announced until closer to Lightbox's August 28 launch.)

The company formerly known as Telecom will launch its Netflix-style service before the end of this month. It's shaping up to be a key part of its push to become more than a phone company — and a potential threat to Sky TV and others in the current establishment.

Spark's Lightbox will offer all the movies and TV series you can stream for $15 a month, a la Netflix.

The service will be open to customers of any ISP.

I had a hands-on play with Lightbox during a visit to the Lightbox office, in what the team calls a "basement" of the main Spark building in central Auckland. 

At launch, Spark will be an iOS (iphone an iPad) app, and also accessible through a web browser on a laptop. More options for accessing the service are on the way, including an Android app, and smart TV apps. An Apple TV app is something the Lightbox team is open to, but they note that's an invite-only gig (in the US, Apple TV supports apps from a raft of contenders, including Netflix and Hulu, for those accessing the service from a NZ account it's pretty barren).

The Lightbox interface is user-friendly and well thought out. It looks familiar to those used to using streaming video ondemand services, and it's simple to follow for those who do not.

There's a mode for kids, and you can have up to five different user logons on one account — useful if different people in a household have different favourites lists etc.

Content can be streamed to a maximum of two devices at once (not a technical limitation but a restriction imposed by content makers).

Everything seems ship-shape from a technical stand point.

I tried Lightbox three ways: watching it on an iPad; watching it on a traditional TV with the content streaming from an iPad via Apple's Airplay and an Apple TV box; and on the trad TV with content streaming via a laptop connected by an HDMI cable.

It all went fine. The content streams almost immediate, with the picture quality increasing after a few moments. Picture quality can go all the way up to 1080p full high defnition if your broadband connection can handle it (and most urban copper broadband connections should be able to, most of the time).

The iPad I was using did lose its wi-fi connection a couple of times, meaning the Lightbox video cut out. Spark Ventures is a skunkworks. Beyond the 12 staff working on Lightbox, there are others working on other experimental products. As you might expect there's a riot of wi-fi. But I also fear for Lightbox that many home users with far more simple setups often have wi-fi glitches. The new service could be quite support intensive, especially if middle NZ takes to it. For now, the plan is for customers to leave questions in an online forum.

In terms of getting Lightbox content to a traditional TV, things are a bit problematic. Attaching a laptop to your TV via an HDMI cable is foolproof, but also clumsy and impractical unless your couch is within a couple of meters of your telly. 

Using an iPad with an Apple TV box as the conduit is a simple, wireless way to get Lightbox video streaming from tablet to TV. But only a tiny, single digit percentage of homes have Apple TVs (by Lightbox's estimate). And very few have an HDMI dongle that perform a similar fuction — an of the small number that do, many will be among the crowd who already directly access Netflix US or iTunes US (or simply pirate content).

The Lightbox team has been wrestling with the question of whether to release its own low-cost wi-fi gadget or dongle (several third-party HDMI sticks are lying around the office), or to remain software-only and hardware neutral. It's a tricky one. For now, increasingly cable local contender Quickflix remains miles ahead in options to reach the main screen, with its tablet apps, Xbox, PlayStation, Google Chromecast and mutiple smart TV brand support (part of me wonders why Telecom didn't simply buy Quickflix, whose market cap is below Lightbox's launch year budget, then sell its Aussie operation to a rival in that market like Ezyfllix).

Sky TV is also planning a Netflix-style service, launching before the end of the year. The immediate threat to Sky should not be overplayed. Craigs' Investment Partners analyst Arie Dekker notes that Netflix (which now has 50 million subscribers and $US4 billion annual revenue) has caused pay TV subs to slow down rather than go backwards. With its emphasis away from first-rights, and on a large back catalogue, Netflix has tended to complement rather than undermime traditional pay TV options.

Right now, there's a mismatch. Sky TV, with its $289 million programming budget, dwarfs Lightbox (whose launch year budget is $20 million all up). Sky recently demonstrated its greater oomph by stitching up exclusive HBO rights in a new multi-year deal. It remains an open, intriguiing question how much firepower Telecom will put behind Lightbox in years to come. The streaming video business is, in large part, about having a big catalogue and a long tail, but first-run rights for a few A-list series are also crucial to grab people's attention (read more about the content street fight here).

The Lightbox team tell me Spark CEO Simon Moutter is among those trialing Lightbox. 

I hope he's giving it a good workout. Telecom was not the central player in the TiVo NZ launch, but it did play a key role as the exclusive retailer and, for a while, its lock on TiVo's Caspa download service, which sold ondemand movies and TV series (Caspa has now been replaced by Quickflix on the TiVo platform). I was shocked that Telecom's retail CEO of the time (presumably because he was glued to his Sky decoder) was ignorant of the basics of how TiVo worked, and the various technical and content drawbacks that doomed it from the start. I hope the boys in the boardroom really are eating their own dog food this time.

What do you think? Has the rebrand from Telecom to Spark changed your mind about the company? Click here to vote in our subscriber-only business pulse poll.

ckeall@nbr.co.nz

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WHAT'S ON THE 'BOX

Lightbox promises more than 5000 hour' content when it launches later this month.

The no-contract, $15/month service will feature two exclusive series: 24: Live Another Day and Vikings. 

 It will also feature:

• Outlander
• Mad Men
• Alpha House
• Betas
• Arrested Development
• Masters of Sex
• Orange is the New Black
• Breaking Bad
• House of Cards
• Homeland
• The Blacklist
• Sons of Anarchy
• Modern Family
• Downton Abbey
• The Inbetweeners
• Orphan Black
• Doctor Who
• The Wiggles
• Dora The Explorer
• Sarah & Duck

Like most streaming-on-demand services, its focus is not on first-run rights. Some shows will not be available on Lightbox untiil a year after they have first screened, others will be ondmeand as soon as a new series has finished playing elsewhere.

Like Sky TV's pending Netflix style service, there is no sport, and no plans to add sport.

There will be no local content at launch, but Lightbox says negotiations are underway. Rival Quickflix recently signed a non-exclusive deal with the largest local TV maker, South Pacific Pictures (a good move since TVNZ and MediaWorks' ondemand services are good for current series, but weak on back-catalogues).

There are techical challenges with streaming content, but as Lightbox CTO Mike McMahon notes, there's no restriction on capacity or expensive negotiations over securing more satellite or terrestrial broadcast capacity.

"We just have to add a few more hard drives to a media server," he says.

But there's the rub. Low barriers to entry have meant allcomers have piled into the local streaming video ondemand market, from Sony and Microsoft to Quickflix to Google (which is now selling HD movies via YouTube NZ). And of course some look beyond our borders to access Netflix US or other services directly, or help themselves in the Torrent. The SVOD fight is much wider than Lightbox vs Sky TV.

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