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Sky TV, TVNZ finally launch igloo

Launch is a win for Sky TV - but it's less clear what is in it for TVNZ. UPDATED with comments from igloo CEO Chaz Savage.

Mon, 03 Dec 2012

UPDATE: Scroll to end of story for comments from igloo CEO Chaz Savage

A year after it was first announced, NZ's joint venture igloo has launched.

The low-cost pay TV service is 51% owned by Sky TV and 49% by TVNZ.

An igloo set-top box costs $199 - paid for upfront by the customer rather than bundled with service.

Customers then pay $24.99 a month on pre-pay for a "Sky Lite" selection of premium channels broadcast to a UHF  aerial including BBC News, BBC Knowledge, UKTV, National Geographic, Animal Planet, Heartland, Vibe, Food Television, Kidzone24, MTV Hits and Comedy Central. The pay channels are broadcast in standard rather than high definition.

If an igloo owner fails to pre-pay, an igloo set-top box can still be used to watch the same mix of free-to-air channels offered by any Freeview decoder.

igloo also features around 1000 on-demand movies ($3 to $7) and TV series ($3 per episode), delivered over broadband, plus a channel that will offer occassional pay-per-view sports events. There is no built-in hard drive for recording programmes.

The service was originally due to launch in the first half of this year.

The Commerce Commission cleared the deal in May (although at the same time it opened an ongoing investigation into Sky TV's ISP partnerships, and whether they its content deals stopped rivals gaining a critical mass of content). But a series of minor technical problems led to more delays.

Poor ISP support
igloo has launched with two of the Big Four ISPs offering umetered data (so it won't count toward your monthly cap when you download pay-per-view movies: Orcon and Slingshot. WorldxChange, Woosh and Snap are also onboard.

But Telecom and Vodafone (now including TelstraClear) are consipcously absent. Together they control around 75% of the home broadband market.

Big win for Sky TV, less clear for TVNZ
NBR's take is that igloo is a big win for Sky TV.

It co-opts one of Sky TV's few potential serious rivals (TVNZ), and it can now tell circling politicians there are two competing pay TV services (albeit with crossover ownership).

Another factor: an igloo box has not hard drive, so can't be used to record TV. 

For Sky TV, that's no problem. It can up-sell frustrated igloo users to its full-blooded MySky service.

But for TVNZ, it's a dead-end.

Cost-efficient launch
Analysts don't see igloo having a material impact on Sky TV in the near-term.

Forsyth Barr told NBR it was a cost-effective way for Sky TV to target lower-spending consumers. Sky TV was requiring customers to pay for an igloo box upfront; it was drawing on existing Sky TV channels for premium content, and utilising UHF spectrum it already owned.

Sky TV has chipped $12.75 million into the venture; TVNZ $12.25 million. Most of the money has gone toward the cost of ordering set-top boxes.

igloo is headed CEO Chaz Savage, formerly Sky TV's head of product and subscriber maketing.

UPDATE: igloo chief executive Chaz Savage told NBR the new, low-cost TV provider is sticking to its target of selling 50,000 set-top boxes in its first 12 months.

"That would be a big year, but it is achievable," the CEO said.

A number of NBR readers asked if All Blacks and Super Rugby games, Mr Savage said "Yes. We will have both available from time to time." That may not be a detailed enough assurance for sports fans. NBR suspects 51% shareholder Sky TV won't risk its core business by sprinkingly too much AB content igloo's way.

Others asked why igloo has no hard drive.

The set-top box has two USB jacks, Mr Savage noted (it also has HDMI), so it's possible a hard drive could be added as an option in the future, or that a high-end model could be introduced later on.

But for launch, the company had been very focused on meeting its target $199 price point, which merged in focus groups as a tipping point.

NBR put it to Mr Savage there was no hard drive because Sky TV preferred people to migrate upward to its MySky decoder if they wanted recording functionality.

The CEO replied that, more than five years after MySky was launched, 50% of Sky TV subscribers still used the older version with no recording functionality, and only around one in 10 Freeview decoder buyers plumped for a MyFreeview PVR. This indicated that while the feature was important, it was "not the be all and end all." 

igloo was not just targeting budget customers, Mr Savage said. There were some who could afford MySky, but objected to being bound by a a contract. igloo's prepay model would appeal.

Ah. Sounds like just the kind of middle class demographic who would buy a slightly more expensive model with recording functionality ...

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Sky TV, TVNZ finally launch igloo