Sky Television decodes customers as it prepares to change its spots

[Archiee]

Prepare to be a bit spooked by Sky Television next year when it suddenly seems to get a sixth sense about what programmes you may want to watch.

For the past year, Sky has been building up a picture of the viewing habits of the 300,000 households that have a Sky TV set-top box that is connected to the internet, storing details of what those customers watch and when.

Next year, Sky will upgrade its set-top boxes with a much more sophisticated menu that, as well as presenting programming in a traditional way, will use what it knows about customers to recommend what they might want to watch next.

Because it will have two years of information on many households, it won't be making be blind guesses from a standing start.

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But there will be limitations to its recommendation engine, given it has no way of knowing for sure whether it is mum, dad or the kids who have turned on the TV – though it may be able to make an educated guess based on the time of day – or what mood they are in.

Sky may also choose to ignore some past viewing choices so it doesn't risk recommending a string of R18 shows to the unsuspecting, Sky's chief product and technology officer Julian Wheeler explains.

"We will make sure we safeguard the customer experience for all members of the household," he says.

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"Customers are sharing with us, or through other things they do online, an enormous amount of data and they don't always know what is being done with that.

"We think we have a responsibility to make sure we treat customer data with the utmost respect and security."

Another option Sky may look at is letting people create personal profiles on their set-top box, so it can learn their individual preferences.    

Sky has been keeping tabs on what customers are watching, with the aim of improving the viewing experience.
TOM PULLAR-STRECKER/STUFF
Sky has been keeping tabs on what customers are watching, with the aim of improving the viewing experience.

The recommendation engine is just one way in which is Sky is re-engineering its business for a future in which it becomes a "curator" of content, rather than the sole source of pay television content.

Wheeler says the goal is for Sky to become "a content navigator," rather than the owner of all-and-sundry content, helping customers who might otherwise be lost in swamp of competing TV offerings, not knowing what's on when, or where.

"Otherwise it is a bit like reading an extremely long menu – you just get too tired."

"Watching television is supposed to be a relaxing experience," strategy director George MacFarlane adds. 

The new approach to marketing its wares will also see Sky launch a range of lower-cost pay-television services.

"We are looking at how we can more flexibly create the product propositions of the future," Wheeler explains.

"These will range from a premium price to low-cost, from 'big bundles' to targeted bundles, from most linear TV offerings to video-on-demand, from the big screen 'lean back' experiences to mobile devices."  

The goal of course is to stop, or at least slow, the rot that has seen tens of thousands of customers quit its satellite service over the past 18 months. 

The next cab off the rank is likely to be a version of Sky's Fan Pass online sports service, which will only play on mobile devices and which Sky chief executive John Fellet has hinted could cost about $15 to $20 a month.

Sky could let people create individual profiles for themselves on its set-top boxes so Sky could better learn their ...
TOM PULLAR-STRECKER/STUFF
Sky could let people create individual profiles for themselves on its set-top boxes so Sky could better learn their tastes, says Sky's Julian Wheeler.

MacFarlane says the mobile sports should be ready for launch in just two or three months, though pricing has not yet been set.

Also in the pipeline is an Android media player from Sky that will look a bit like an ice hockey puck, which will let customers access Sky and other internet television and video services such as Netflix and YouTube without requiring a set-top box.

It won't contain a hard drive, but customers will be able to a PVR (personal video recorder) in the cloud.   

"We are in conversations with our terrestrial partners as well as such as Television New Zealand and MediaWorks," Wheeler says.

"Customers will also be able to download apps, so there will be a lot more flexibility for them to create their own environment."   

Sky showed it was no longer sticking its head in the sand over its challenges in February, when it cut the entry price of Sky to $24.51 a month by splitting its Sky Basic package into a new base product, Sky Starter, and Sky Entertainment.

The stakes are significant. Fellet has noted that when Foxtel pursued a similar strategy in Australia in 2014, by halving its entry-level price from A$49 to A$25 a month, it saw about 20 per cent of customers cut back their channel choices.

That appears to have set the benchmark by which Sky is judging its Sky Starter strategy.

If 20 per cent of Sky customers didn't elect to buy Sky Entertainment with Sky Starter, that would still represent a revenue hit for Sky of $36 million a year. 

That would only be partially offset by lower programming costs, with most of it flowing through to Sky's pre-tax profit, which fell to $167m last year.

MacFarlane says Sky is happy with the way the Sky Basic split has worked out so far, which may be a good indication Sky doesn't think it's on track for a higher level of customer downgrades.

But it may still be early days.

"We don't want to come out and say this has been a success," he says.

Game of Thrones has been a major money spinner for Sky.
HBO
Game of Thrones has been a major money spinner for Sky.

The competition

Sky chief executive John Fellet got some sideways looks last August when he said in the company's annual report that "piracy" was the company's biggest competitor.

But he may have been more in touch than it seemed.  

Eight years ago, my taxi driver ranted about Sky Television's pricing as he pulled out from Auckland Airport and headed towards Sky's headquarters, in suburban Mt Wellington.

But this time, making the same journey, my Fijian Indian driver is much more laid back. 

He never misses a Crusaders match, but he doesn't watch it on Sky Sport.

Instead, for years, he has used an Android media player sold by WorldMax TV.

It only costs about $200, he tells me, "and after that you don't have to pay anything".

There is heaps of programming including all the sports he wants, the taxi driver assures me, and it is reliable, with streams that rarely shut down.

WorldMax TV's reviews on social media are est described as "mixed".

But "now many white people use WorldMax as well," the driver tells me. "Sky have lost so many customers." The only disadvantage is there is no news channel, he says.

Does he think the programming is all above board? He isn't too sure.

Sky is happy with how its Sky Starter strategy has worked out so far, strategy director George MacFarlane says.
TOM PULLAR-STRECKER/STUFF
Sky is happy with how its Sky Starter strategy has worked out so far, strategy director George MacFarlane says.

WorldMax TV's website says it has 50,000 customers worldwide. It promotes its programming from India, Pakistan and Nepal, but its call centre operator confirms I can get the Super Rugby and yes, it's legal, she assures me. 

She is Pakistani but tells me the company is actually Australian. The link to WorldMax's Wellington reseller is broken but she gives me the cellphone number of an agent for the company in Wellington who helps me out.

He tells me I can watch "any major sporting event happening in the world" and that rugby is just part of it.

After I identify myself as a reporter and ask if it is legal or pirated, he says WorldMax TV is just providing links to streaming websites and doesn't own anything. I should probably call the company's head office in Sydney, he says.      

Sky spokeswoman Chris Major says "rogue operators selling internet streaming boxes pop up every now and then" and it doesn't have any specific comment about WorldMax TV.

"We have sought a ruling from the courts regarding the legality of the sale of internet streaming boxes pre-loaded with piracy software.  

"We await judgements from the Auckland High Court regarding My Box NZ, and the Christchurch District Court regarding Fibre TV, to determine if they breached New Zealand fair trading laws by making misrepresentations to consumers about their products."

My Box owner Kris Reddy said last year that the company had sold more than 8000 devices to New Zealanders. 

Similar services have been ruled illegal and shut down in a number of other countries, Major says.

"Consumers who buy these products and services on the promise of access to premium content with a one-off box payment need to be wary that their investment may effectively be rendered useless, given actions abroad to take down the pirated content streams. 

"The only people to profit from such purchases are the illegal operators, whilst companies playing by the rules suffer." 

 - Stuff