Sky Network Television and Television New Zealand had picked an ideal time to launch a low-cost pay TV service as the move was both strategic and defensive, Forsyth Barr broker Peter Young said yesterday.
Both companies had recently announced they would form a partnership to own a new pay TV service with Sky owning 51% and TVNZ owning 49%. The service will be know as Igloo and start in June next year.
Igloo would be a prepaid service with no contracts, Mr Young said.
It would also be a self-installed pay TV with 11 channels, Freeview channels and online streaming of pay-per-view of sport, movies and television series.
The Igloo service would cost $25 a month and the box would have live pausing functions. The box would be made available through retailers or online. The decoder would be "very well priced" at $200, he said.
"Igloo plans to tap into demand from households who don't want to be contracted to a monthly premium pay TV subscription service but do want to have a greater depth of channel choices at affordable prices - including pay-per-view choices of sport and movies."
The launch would coincide with the timing of the analogue switch-off later next year, Mr Young said.
Igloo had a starting capital base of $25 million and was projected to have 50,000 customers in 2013 and make a loss of $3 million in the same year.
A large part of the loss in 2013 related to the start-up fixed costs and transmissions costs.
As subscriber numbers increased, revenue sharing should quickly cover the initial lost, he said.
Both Sky and TVNZ saw Igloo as a logical extension of their existing businesses, meeting the gap in the market they were well positioned to lead rather than leave the door open to other companies looking to offer similar low-end pay TV services.
"The operating business of Igloo, being a prepaid and content sharing structure, is relatively low risk with upside if it genuinely grows the market.
"Both companies recognise that in partnership, the content offering on Igloo should be attractive to households wanting an affordable offering into digital pay TV that is both flexible and simple."
At this stage, Igloo had not finalised a lot of the commercial detail, Mr Young said. The numbers included in the summary were initial targets. A key contact, yet to be finalised, would be related to uncapped broadband deals with the ISPs (internet service providers).
