Sky TV slashes igloo subscriber target - what partner TVNZ should do about it

Sky TV has slashed its target subscriber target for igloo from 50,000 (the figure given pre-launch) to 19,000 by December this year - the first anniversary of its launch.

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In an investor day update, the company also said igloo needs 40,000 customers to breakeven.

Sky TV CEO John Fellet had already downgraded his igloo outlook, telling NBR ONLINE on December 3 he saw 30,000 subscribers this year.

The original theory was that 2013 would be a key year for sales, give it's the analogue switch-off year, and digital laggards are being forced to choose between Sky TV or a Freeview-capable solution.

Sky TV owns 51% of igloo, TVNZ 49%. The pair have invested $25 million on the same split.

An igloo box costs $199. It gives you all Freeview channels for free plus, if you pre-pay $25 in any given month, you get a sub-selection of Sky TV's pay channels. Some on-demand films and TV programmes are also available, plus pay-per-view events on an ad hoc basis.

To NBR, slow igloo sales are no surprise.

The lack of recording functionality makes it unattractive to many buyers.

In an interview after he quit for job in Australia, original CEO Chaz Savage said of igloo's product development:

"How do we make it more appealing? Personal video recording (PVR) is a very obvious one, but then we have to factor in our shareholder Sky, which already has a very successful MySky HDi product. Would that cannibalise that business?

"Although the set top box isn't PVR ready currently, it is able to become a PVR with an external hard drive or USB. Initially we held back that piece of functionality."

And it's still holding back. 

Sky TV - and by extension Sky TV investors don't mind (the glum igloo news was ignored as shares [NZX:SKT] closed up $1.46 to $5.55). If potential igloo customers balk at the lack of hard drive - or igloo's ongoing failure to reveal how Super 12 or All Blacks games will be made available pay-per-view -  they can be upsold to a My Sky HDi. 

But it's not clear how the stunted igloo benefits TVNZ.

Much of igloo's product development came while TVNZ was between CEOs, and cowered by the failure of TiVo (which, ironically, was kneecapped by Sky TV's long-time refusal to supply an EPG for Prime TV).

Sky TV CEO John Fellet has repeatedly told NBR that price is the most important factor for potential igloo buyers, and a hard drive can't be accommodated at $199.

His company sees igloo as a way to attract financially-challenged types, many of whom would never go for MySky. As an added bonus, it co-opts potential rival TVNZ, and keeps politicians happy that there's a semblance of pay TV competition.

TVNZ's igloo ambition should be set a little higher.

Now he's installed in the big chair, Kevin Kenrick should push for an igloo version 2.0, with recording capability.

He also needs to push for more pay-per-view sport on igloo - another obvious area where Sky TV wants to protect its home turf, but TVNZ has nothing to lose.

Or he just cut his losses, and focus on pushing premium content through Freeview, which has demonstrated a channel that could be used for ondemand paid content.

Follow @ChrisKeall

ckeall@nbr.co.nz