Sky TV is celebrating a court win against My Box, the streaming service that advertises its ability to play Sky’s content for free.

The Auckland High Court ruled that My Box cannot describe its service as legal. It confirms that using its hardware and software to show Sky-owned material is a breach of copyright.

The court will hold a hearing to decide costs early next year.

Sophie Moloney, Sky’s general counsel says: “This decision, along with the recent ruling against Fibre TV boxes in Christchurch, sends a very clear message to New Zealanders that these services are not all they are cracked up to be.”

Sky’s roundabout victory

What’s curious about this case is that Sky didn’t manage to win a straight legal victory over video piracy. It took action against My Box and the company owner Krish Reddy under the Fair Trading Act.

In effect, Sky’s successful legal argument was that My Box was making claims about its service that were misleading.

This echoes the way US authorities finally managed to nail gangster Al Capone because of his tax evasion, not his more serious crimes.

My Box pirate

What’s pleasing about this case is that Reddy is an out-and-out pirate. This isn’t like a bunch of kids being busted for watching a naughty episode of a show that isn’t even available through legitimate entertainment channels. It’s not like someone bittorrenting a missing episode or using a VPN to watch BBC coverage.

Sky has a far better moral argument here.

Reddy may not be a gangster, but his My Box business is copyright piracy on an industrial scale. He claims to have sold 17,000 boxes.

While you can’t argue that every one of those 17,000 customers would have otherwise subscribed to Sky, it’s clear that Reddy sucked a lot of money earmarked for video entertainment out of an industry that struggles to pay its way.

Last year I received one of the My Box spam emails. Heaven knows how the company got hold of my details. It did come via a long defunct but still forwarded email address.

Wake up call

The fact that it was spam is a wake up call in itself. But the email wasted no time telling me that I could get content for free without paying a Sky subscription. It looked crooked.

Piracy is in decline. There’s less need to steal content when it isn’t expensive to buy from the likes of Netflix or Lightbox.

Even sport, which comes with more of a premium price tag, is affordable for most New Zealanders. At least in relative terms. A year-long subscription to Bein Sport NZ or Sky Fanpass is roughly a couple of days pay for someone on a minimum wage.

Sky is My Box’s most obvious victim. In a way so are the people who paid the company money and believed they were getting legitimate access to streaming video services.

In theory, any customer would have a good case to demand their money back. I suspect they, like Sky, will find there are few if any assets left in the business.

It’s no coincidence Sky TV reported a $240 million loss days after Spark won the Premier League Football rights. A thread connects the two news stories.

Spark is New Zealand’s rising media power. Sky is still number one, but fading.

You can’t blame Sky’s problems on Spark’s football win. The traditional pay-TV company hasn’t owned Premier League rights for five years now. Yet the move underscores the shift from old school television technology to streaming media.

Football key to sport portfolio

The English Premier League joins Spark’s growing TV portfolio.

The telco, yes Spark is still mainly a telco, also has the local rights to Manchester United TV. On the team’s current form that may not be much to write home about. Even so it’s a sound investment. United is the best know and most followed English club outside of the UK.

Spark says it plans to wrap the two football deals into a new standalone sports media business. Spark already has the rights to next year’s Rugby World Cup.

The company has hinted there is still more to come. Sky TV doesn’t have the clout, or the money, it once had. So Spark has an opportunity to prise other popular sports away from the incumbent. If nothing else, New Zealand Netball and Cricket must be possible candidates. And perhaps various motor sports.

Sky FanPass

This is not great news for Sky. But there are chinks of light among the dark. The pay TV broadcaster cut a deal allowing Spark to resell its FanPass service.

Fanpass is now another small, but nicely done plank in Spark’s sports media portfolio. It also means Sky gets to tap a market that it has previously struggled to reach.

Let’s not forget LightBox. Spark’s streaming TV operation may be a pale imitation of Netflix, but it’s a useful value-add for Spark’s broadband business.

Another useful add-on for Spark is that it offers cut-price Netflix to customers signing for long broadband contracts.

Sticky TV

All-in-all Spark already has enough media properties to keep viewers glued to its broadband services. And that’s a critical part of the company’s TV-over-internet strategy: customers who buy a bundle of services are less likely to decamp to a rival broadband service.

Premier League football isn’t New Zealand’s most popular sporting code by a long shot. However, it has particular value for Spark. First, it tends to be watched by relatively well-heeled fans who are willing to pay a couple of hundred dollars or so for a year’s worth of games.

Second, Premier League fans are well used to watching games using streaming. It was the first major sporting property to be picked up by a digital organisation. That was Coliseum Sports Media which had the rights from 2013 to 2016. Spark works in a partnership with Coliseum before BeIn Sport won the rights.

Overseas moves

In a media statement Spark managing director Simon Moutter say his company developed its plan after looking at overseas sports content media moves.

He says: “We’ve carefully considered the different models and will be looking to replicate the good things other businesses have done and learn from the challenges they’ve had — all the while thinking carefully about how sports media fits in a New Zealand context”.

Spark says it will launch its own sport ‘platform’ early in 2019 and will annouce pricing and package deals closer to the launch.

Latch

Spark Sport head Spark hired Jeff Latch to head the Spark Sport operation. He will oversee buying more content rights and will take charge of the ‘platform’. Latch was previously director of content at TVNZ. In that role he was in charge of buying content, including sport. Spark is partnering with TVNZ for the Rugby World Cup project.

Latch says Spark will work with a specialist sports-streaming company. He says the platform used will be different from the one used by Spark’s Lightbox service.

He also said Spark intends its sports media operation to work as a standalone business and not be used merely as a way to woo broadband or mobile customers. To a degree this is what Spark has done with Lightbox.

Netflix close to two million NZ viewers

Had Sky merged with Vodafone it may have fought off the challenge from Spark, although that’s far from certain. Yet nothing could protect Sky from its other threat: Netflix.

Roy Morgan research says Netflix now has nearly two million viewers in New Zealand. The service saw subscription numbers grow 35 percent in the last year to reach 1.9 million viewers. The research company goes on to report:

“Now over three million New Zealanders have access to some form of Pay or Subscription TV, up 13.9 percent on a year ago. The growth in Pay and Subscription TV is being driven by the likes of Netflix along with a suite of rival streaming services including Lightbox, Sky TV’s Neon and Amazon Prime Video.”

Viewer numbers are growing slower for Sky TV’s Neon service. It was up 1.7 percent in the year to reach a total of 1.6 million viewers. Lightbox is the second most popular video on demand servide with 830,000 users. That’s up 43 percent on last year, growing faster than Netflix. Vodafone TV has 295,000.

Sky TV launched legal action in a bid to force ISPs to block access to streaming and video download websites.

As you’d expect, the move didn’t go down well with the industry. At least two ISPs say they will fight Sky in court.

Sky sent notice that it will seek court orders for Spark, Vodafone, 2degrees and Vocus — which trades as Orcon, Slingshot and Flip – to block a list of unspecified sites. The date blocking should start is not specified in the letters.

Spark and Vocus seem ready to resist.

The four ISPs account for more than 90 percent of all online accounts in New Zealand. If Sky gets them to block, picking off the smaller players will be trivial.

Pirate Bay

Sky TV’s letter specifically names the Pirate Bay as a site it wants to be blocked.

The pay TV company says it is targeting illegal pirate sites as they are a threat to local entertainment industries and sporting codes.

The timing is curious. Most of the threat from piracy has subsided. The battle is won.

Once were pirates

It would have made sense for Sky to have moved against these websites in the past. But today piracy is only a shadow of its former self.

Vocus consumer general manager Taryn Hamilton says his company’s stats show visits to The Pirate Bay – a popular file-sharing site – is now at 23 percent of its 2013 peak.

Most of the damage to Sky TV’s business was done a long time ago. Today pirates are no threat. Legitimate online streaming services like Netflix, Hulu and Amazon are what is really killing Sky’s business. They have already killed the pirates.

They offer a similar mix of entertainment programming at a fraction of Sky’s price. Netflix is $15 a month, Sky TV is around $80.

Sport is different

Things are different with sports programming. Sky has the rights to the most popular sporting codes in New Zealand, there are no legitimate alternatives.

While determined customers with VPNs can often shop around overseas for a better deal, it’s often too much trouble for most people. And overseas coverage can be inferior,

Hamilton says the idea of Sky blacklisting sites is dinosaur behaviour and something you might expect to see in North Korea.

It is certainly dinosaur behaviour. The fact that Sky names the faded and diminished Pirate Bay as a public enemy is a sign of how out-of-touch it is with the current scene.

Yet blocking websites isn’t restricted to totalitarian North Korea. A number of countries have laws blocking pirate websites. Often after the kind of litigation Sky plans. Web-blocking regimes don’t always work. There are plenty of workarounds for determined pirates.

Fighting Sky

Hamilton says Vocus will fight Sky in court. His company is not alone. Spark says it also aims to fight the injunction. Last time there was a copyright battle, Spark sided with Sky TV.  InternetNZ says it is seeking legal advice. Vodafone, which has a close relationship with Sky, says it will comply with any court order. At the time of writing, 2degrees has yet to commit.

Should the four ISPs co-ordinate their defence, maybe with help from InternetNZ and other interested parties, life could be difficult for Sky, which is already in long-term decline as it continues to fail to adjust to new technology.

Lawyers are obvious winners here. Litigation is likely to be expensive. One problem is there is no precedent in New Zealand for this kind of complaint, the Copyright Act stems from a time before video streaming was practical. Until now most service providers have walked away from pitched battles.

Kodi victory

Around the time Sky sent letters to the ISPs, the company won an interim injunction against Fibre TV which sells the Kodi set-top box. Fibre TV sells the set-top box along with software designed to make piracy easy. The decision was made in the Christchurch District Court and Sky was awarded costs.

It is possible that the Kodi victory spurred Sky TV’s renewed interest in attacking the ISPs. Possible, but unlikely. Fibre TV was small and unable to put up much of a fight. The case against Fibre TV was a slam dunk and there’s not much public sympathy for the company.

On the other hand, the attack on ISPs looks set to be a public relations disaster for Sky. The move is unpopular with consumers.

Criticism of Sky TV

As you’d expect Sky TV has come in for a lot of criticism over its move – not just from the ISPs who are in the firing line.

It is fair to say Sky is struggling to defend an outmoded business model. Yet it is equally understandable that the company wants to protect the value of the rights it has purchased in good faith from movie or TV studios and sporting codes.

It is possible that Sky is acting against ISPs on behalf of rights holders. In the past, the big US-based media companies have attempted similar actions. They or the sporting codes could be bankrolling Sky’s litigation or even pressuring Sky to act as their proxy.

All these protagonists seem out of touch with what’s happening on the ground. Netflix has shown how to make software piracy redundant. It charges what consumers consider a fair price for a decent selection of programming. That becomes a compelling alternative to navigating the dark side of the internet.

Sky needs to find a way to cut its prices to Netflix-like levels. From outside, that looks hard because it appears bundling channels lets Sky subsidise some content by overcharging for other content. If so, it is an unsustainable business model. Moreover, the problem has nothing to do with Orcon customers being able to see the Pirate Bay.

Writing at Newsroom.co.nz, Mark Jennings covers a weak financial result from Sky TV. He quotes boss John Fellet:

“Piracy has become our biggest competitor.

“The big problem is the increasing ease by which pirated content is accessible.

“Devices preloaded with piracy software enable users to access pirated content stored on servers overseas, from the comfort of their living room.”

There’s little question piracy happens. Every so often an email arrives from a company that offers exactly the kind of device Fellet blames for a poor financial result. You can buy a VPN and watch shows or sports that cost money on Sky on other nations’ free to air TV channels. It’s not hard.

But it’s not the whole story.

Keen consumers of paid services

Analyst firm IDC says New Zealanders are now among the world’s keenest buyers of paid online services. Some 22 percent of consumers here say services like Netflix and Lightbox are their main way of viewing entertainment.

That’s on a par with the US and a long way ahead of the worldwide figure of 14 percent.

We’re still behind North America when it comes to buying a streaming service. On the other side of the Pacific 41 percent pay for streaming TV, here just over a quarter do.

New Zealand wasted little time moving from near the bottom of the online service league to the top of the table. It is three years since Spark launched Lightbox, the first widely available local service. There were also services like the Premier League Pass which allowed fans to watch English football on digital devices.

Netflix

While many New Zealanders paid for an international version of Netflix, that service didn’t arrive in a local form until early 2015. Network companies like Chorus and ISPs like Orcon show graphs of how data consumption rates leaped after Netflix opened in New Zealand. It helps that these services arrived as the nationwide UFB fibre build hit its stride.

These numbers give the lie to the idea that New Zealanders are software pirates or spend a lot of time downloading illegal content.

Some of the discussion of this survey on social media centred on the poor entertainment choices had before streaming video was a practical option.

Fellet’s Sky TV enjoyed an effective monopoly on paid video entertainment for a generation. By overseas standards it is, or was, expensive. Sky was never fast bringing shows to New Zealand, that wasn’t an issue back when it started, but online spoilers and the buzz around big, popular shows meant that annoyed consumers.

Sky missed a trick with the internet. It still doesn’t make all content easy to buy online. Instead it uses out-of-date set top boxes. Its technology is more than a decade behind the times.

Download pirates

Customers found they could download shows ahead of Sky’s schedule. They can watch them when they like. They also realised they could get their material without paying. Many still do. But as the IDC evidence shows, New Zealanders are more willing to pay for TV than most people in the world.

While Sky could legitimately claim it was losing to pirates, there’s another side to the debate. Studios sold exclusive rights to Sky for vast fortunes, but did little to police how their products were distributed.

For a while New Zealand consumers could buy shows from international online services for a fraction the price charged by Sky. The pay TV company would have a legitimate claim against the studios, but chasing wealthy lawyered-up corporations is harder than busting kids who know how Bittorrent works.

Not just movies and sport

IDC says it isn’t just movies, sport and TV shows. New Zealanders are among the keenest users of all premium digital services. This includes online music streaming, cloud services, and console gaming. We are also among the highest users of Facebook with 81 percent of people who answered the survey using the service in the month before they were asked. The worldwide figure is 74 percent.

People here own an average of 6.5 digital devices and spend 56 hours, roughly half, of waking hours connected to online.
In general, we’re a practical breed. We tend to use digital services if there’s an obvious benefit. If the benefit is less clear, we’re more tentative. So just 18 percent of New Zealanders have used virtual reality in the past year. This compares with 38 percent worldwide.

To get these numbers IDC questions 30,000 adult consumers in 19 countries. 1400 of them were in New Zealand.

Sky TV to become Vodafone-SkyHere in New Zealand, television stories dominate the week’s telecommunications news.

Sky and Vodafone bow to the inevitable and call off their merger. Meanwhile TVNZ goes all in on streaming video.

For more than 40 years journalists have written about convergence. The telecommunication triple play idea: combining voice, data and television, is well over 20 years-old. I first heard about it in around 1990. That’s right, it pre-dates the commercial internet1.

Almost overnight, we’re on the other side of the revolution. Some bewildered people are looking back and wondering what happening. The rest of us wonder why it took so long to get here.

You say you want a revolution

The revolution is not that hard to understand, television uses electrical signals. They used to be analogue. Digital is better. Once TV was digital, it was only a matter of time before it became another stream of bits travelling through networks.

It took longer for the industry to grasp what that means in practice. Today we have Netflix and a cluster of junior would-be netflixen. We have binge viewing. We have on-demand viewing. Yacht races from across the world beam on to our mobile phones as we commute to work.

What we still don’t have is the choice and flexibility we get from other online media. That’s coming.

History lessons

If you look at the sweep of online history, a merger between Vodafone and Sky TV makes perfect sense. It made sense to the management and board of both companies. If you look at the deal with the eyes of a competition regulator, nixing the deal makes sense. It could have established a monster.

There is something odd about the Commerce Commission’s decision on the Vodafone-Sky merger. Yes, a merger would give one telco access to the crown jewels of sports programming. Yes, it could be exclusive access.

But Sky still has a monopoly on that material. A stand-alone Sky can cut an exclusive deal with a broadband company. Indeed, it’s quite possible that it will strike an exclusive deal with Vodafone. Today’s agreements and contracts between the two companies point in that direction.

Exclusive anyway?

So the Commerce Commission vetoed a merger because of something that will happen anyway. Am I alone thinking that is odd?

Whatever the logic, Sky and Vodafone have come to terms with the decision. The two issued a terse statement to the New Zealand Stock Exchange on Monday. It gave no reasons. But said they withdrew their High Court appeal protesting the Commerce Commission’s decision.

The marriage may be off, but the two companies remain good friends. The relationship is still on.

Free Sky Sport for Vodafone customers

In June Vodafone said it would give 12 months’ free Sky Sport to customers buying broadband and a basic Sky TV service. This is, more or less, the kind of arrangement the Commerce Commission worried about.

Elsewhere, Vodafone mobile customers can get a deal which includes free Sky Neon. And Sky is providing Vodafone with exclusive live coverage of All Blacks matches.

There’s a secondary commercial logic here, the phone company is now the team’s sponsor. Yet both deals have a whiff of the exclusivity that the Commerce Commission feared. Remember, in February the Commerce Commission said a proposed $3.5 billion merger would reduce competition.

Separate, but vertically-integrated

It said Sky and Vodafone had an opportunity to create a vertically-integrated business. That would give a single telco access to all popular sports broadcasting rights. There was a fear the market power wielded by the new business would lock out other potential bidders.

Now rivals fear the two non-merged companies are doing the same thing anyway. They are building a form of vertical integration without all the parts being in a single company.

The tragedy here is that, unlike Australia’s ACCC, our regulator can’t impose rules. That way it could OK the merger and insist the new company licence Sky content to all-comers.

There’s a ridiculous lack of broadcasting oversight in New Zealand. The Commerce Commission’s job is to ensure competition. We have intense telecommunication competition, but one company holds a TV sport monopoly.

TVNZ goes all-in on digital

From Monday, Television New Zealand will livestream channels One and Two. Viewers will be able to see all broadcast material over the internet on PCs, tablets and phones. Everything will be available online in HD 720p format. There will also be a new catch-up on-demand service.

Some material will be in box-set format for binge viewers. Programmes will be on Chromecast from next month and Apple TV later this year.

TVNZ plans to optimise its streaming service for mobile devices. It will also keep programmes available online for longer.

For now, there are no plans to do anything about television transmission. Although TVNZ says that could change depending on demand.

The ghost of Netflix

All these moves acknowledge the changing way people use television. The spectre of Netflix is somewhere there in the background.

The key problem for TVNZ is that it earns its revenue from advertising. This is more annoying and intrusive online than on broadcast TV.

If TVNZ wants to address Netflix head on, it might think about offering an ad-free paid option. Of course, it would need to have enough high quality material to make that viable. It could start by investing more in its news and current affairs programming.


  1. People started talking about the idea in the 1990s. I first heard the term around the time Kiwi Cable was building an HFC network on the Kapti Coast. The first serious attempts at triple play didn’t come until later. ↩︎