From today, Sky Basic will be replaced with two new packages - Sky Starter and Sky Entertainment.
Sky Starter is the new minimum package and contains fewer channels, at $24.91 a month. Sky Entertainment costs $25 a month and features UKTV, Discovery, Crime + Investigation and other channels.
Sky chief executive John Fellett said most customers enjoyed a wide range of channels and together, Sky Starter and Sky Entertainment offered all the same channels as the current Sky Basic for no extra cost.
''Those customers don't need to do anything other than keep enjoying the great content they are getting now.''
Customers who subscribed to Sky Starter, Sky Entertainment and either sport or movies would get SoHo as a bonus, he said.
Sky wanted to offer Sky content to all Kiwis in ways that worked for them. New Zealanders who did not want the full channel line-up had a lower entry point. Sport fans could now get Sky Starter and Sky Sport for less than $55 a month, Mr Fellett said.
A Sky spokeswoman told the Otago Daily Times existing customers who had sport or movies needed to take no action to get Soho, or get it free if they were already subscribers.
Forsyth Barr broker Suzanne Kinnaird said Sky was a high operating leverage business and the price reduction would have a dramatic impact on earnings.
''If we assume 50% of Sky satellite customers downgrade from the basic to starter package, it will reduce our 2019 financial reported profit by about 43%.
''Foxtel's experiences in Australia suggest significant price reductions are not sufficient to stave off competitive pressures.''
The price and package changes were announced as Sky announced its profit for the six months ended December.
Earnings before interest, tax, depreciation and amortisation (operating profit) were up 2.4% to $153.5million in the period, thanks mainly to a 9.3% fall in expenses to $279.6million.
Revenue was down 5.5% to $433.1million and earnings before interest and tax (ebit) were up 4.7%. The reported profit was up 12.1% to $66.7million from $59.5million in the previous corresponding period.
The operating cash flow fell 9.3% to $109.8million at balance date and capital expenditure fell more than 46% to $28.2million from $52.6million.
Sky chairman Peter Macourt said while total subscriber numbers fell by 37,359 in the year to December, almost 30% of the figure was due to the closure of the online DVD rental business Fatso.
''We made the decision to close the mail-delivery DVD business and reallocate resources to our growing internet-delivery products, which meant losing 10,608 subscribers from our overall count.
The fall in subscribers also reflected continued competition from OTT (streaming content) providers and the ongoing prevalence of piracy, he said.
The changes to Sky's pricing and packaging were designed to attract new customers to Sky and to return subscriber numbers to growth.
Sky was also exploring improvements to its online services, Fan Pass for sport, and Neon for entertainment.
They were the fastest growing areas of Sky's businesses and serviced a segment of viewers who preferred video on demand (VOD), Mr Macourt said.
Sky would pay a 7.5c fully imputed interim dividend, down from the 15c per share paid in the previous corresponding period and 12.5cps paid in September.
The board believed while Sky continued to operate in a rapidly changing and uncertain media environment, the company needed to have the flexibility to met challenges and the balance sheet strength to successfully negotiate renewal of key content deals in the future.
In order to achieve those objectives and place Sky in a much stronger strategic position, it was necessary to reduce debt more rapidly than was possible under the pay-out ratio for the previous period, he said.
Ms Kinnaird said she expected material downgrades to medium-term earnings forecasts following Sky's announcement.
As expected, the fall in revenue had been insulated by programming and operating costs savings. However, the magnitude of each was larger than the forecasts.
''The result clearly reinforces the continued and substantial structural pressures on Sky from escalating competition for audiences.''
No full-year guidance had been provided and Ms Kinnaird expected a significant second-half earnings impact from the pricing changes.
Sky shares last traded at $2.59, down 7.5%.
