Stuff Pix new directionStuff Fibre says it is to offer Stuff Pix, a movie streaming service, from early next year. It takes the company in a new direction, one that hasn’t been tried before in New Zealand.

While getting into content is a natural move for an ISP part-owned by Fairfax, the largest regional media company, Stuff Pix has little to do with its parent’s traditional news business.

Instead, Stuff Pix opens with a catalogue of around 600 movies. Customers can watch them online for between $1 and $7 each.

Paddy Buckley who previously headed Quickflix in New Zealand will run Stuff Pix as general manager.

Stuff Pix not taking on Netflix

Buckley says the operation is a replacement for closed video stores, not a Netflix competitor. It will be open to all internet users and its main attraction will be the price. There is no subscription fee. Customers pay a one-off fee to view each movie.

He says the prices will be the lowest on the market. While it is technically possible to buy movies for less by parallel importing, customers need to set up a VPN (virtual private network).

Different, not differentiator

Although part-owned by a large corporation, Stuff Fibre is a broadband minnow and has yet to make an impact on the market. Until now it has offered rock-bottom prices and little else.

Adding Stuff Pix to the business is a bold attempt to build something other than a low-margin, race-to-the-bottom owner of a dumb pipe.

As you might expect from a minnow, Stuff Pix is a modest entry into the streaming market which is dominated around the world by Netflix.

The list of 600 movies is not large. Most old-school video stores had far more extensive catalogues. The movies on offer are not-exclusive. Stuff Pix will sell to people who are not Stuff Fibre customers.

In other words, with the way the businesses and offers are structured at present, no-one is going to buy Stuff Fibre to get at Stuff Pix. On that basis, it isn’t a differentiator. But it is an extra line of revenue and that’s important.

Buckley says Stuff Pix prices will be the lowest on the market. This means it will run on slender margins. The broadband service business is all about relatively small margins: the steady drip of subscription fees rolling in month after month that can still be a money-making recipe.

Revenue per user

Normally when ISPs add media, the idea is to bolster the margins and to raise the average revenue earned per user. That could work at Stuff Fibre, there will be opportunities to cross-sell moves to existing customers.

New Zealand’s two largest ISPs, Vodafone and Spark, have their own media offering. Vodafone resells Sky TV content through its Vodafone TV service. It isn’t cheap. Yet has an extensive catalogue of material and exclusive rights to popular sporting codes so there is a lot of value in the bundle.

Vodafone TV has the potential to more than double the revenue the company gets from each customer. It should do even better when it comes to lifting the per customer profit.

Meanwhile, Spark’s Lightbox streaming service seems a defensive play although it is a clear differentiator. Spark customers get Lightbox as part of broadband or mobile accounts. It’s a way of adding value and justifying higher prices. Spark’s basic unlimited fibre plan costs $95 a month compared to Stuff Fibre’s basic $90 a month.

Stuff Pix media strategy a new direction was first posted at billbennett.co.nz.

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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.

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Vodafone TVYou need a fast fibre connection to use the new-look Vodafone TV. Less than 100Mbps won’t cut it. That means a UFB connection or Vodafone’s own FibreX alternative.

You also need a Vodafone broadband account. The service is company exclusive. CEO Russell Stanners says he hopes customers who like the look of Vodafone TV will reward his company with their business.

Vodafone has offered a TV service for some time. Its 2013 earlier incarnation was, in effect, a version of Sky TV’s My Box reworked for the internet.

The new version is something else. The hardware is a puck-sized box packaged with a remote control. In some ways it is like Apple TV.

It’s not about the hardware

There’s not much to the hardware because there doesn’t need to be much. The cloud does all the heavy lifting. An Amazon server stores all TV shows, movies and other video. It could be in Australia, but it could be anywhere in the world.

Cloud storage has the vast catalogue of material and the user’s own saved program choices.

There are also mobile clients for phones and tablets. Stanners says, you might be sitting at home watching the All Blacks test on a large screen before going on a trip.

When your taxi arrives, you can press pause on the big display. Load yourself in the car and resume watching the game from the point where you stopped en route to the airport. Pause again, dump your bags and find a seat in the lounge before getting back to watching the game on your tablet.

Stanners says the experience is seamless and brings all the screens together. Vodafone wasn’t able to show the hand-off at the Auckland event to show off the product. Yet staff were able to show how well Vodafone TV works on big screens and on mobiles. It is impressive and like all impressive technology has a faint whiff of magic about it.

Reverse electronic programme guide

Using the cloud has other advantages. There’s no likelihood of running out of local storage. And there’s a powerful reverse electronic programme guide.

This makes it easy to find the shows you want. One neat twist is you can use your mobile phone to cue big screen content. It’s a form of on-demand programming. Armed with the reverse programme guide, you can search back through the last week or so to find shows that you may have missed. The actual timespan wasn’t discussed.

Vodafone TV uses the company’s proprietary intellectual property. The company has a similar product in parts of Europe. Stanners says there has been a huge amount of local input into the service on sale here. Not least, is the work clearing the rights with content owners to build the reverse electronic programme guide.

Vodafone TV: made for Sky merger

The TV-as-a-service product was already in the pipeline when Vodafone planned to merge with Sky. It shows what Vodafone was able to bring to the party. Sky, meanwhile, owns the bulk of content. It will all be there on Vodafone TV, but it’s isn’t an exclusive relationship. The device is able to run apps and from day one there will be Netflix, YouTube and content from Mediaworks. TVNZ will join them soon after.

Vodafone was coy about the precise launch date and the cost. Stanners says it will be soon. There was a whisper at the event that soon means the next week or two. We could have the new Vodafone TV before we have a government.

He wouldn’t talk prices, but Stanners says they will be competitive. Again, the word around the event is that it won’t be expensive. There will be add-ons, some premium content and extras like Netflix subscriptions. At this stage customers will have to buy Netflix themselves, but Vodafone may yet offer it.

Party-on dudes

It doesn’t stop there. Stanners says one advantage of Vodafone’s approach is it makes distribution easy for smaller content providers. He says that means we could see the emergence of Wayne’s World-like niche channels.

The event made it clear there is still a strong relationship between Vodafone and Sky. Vodafone TV delivers most of what a merged operation could have achieved. It does so without causing regulatory ripples. There is no legal compulsion for Sky to offer the same content to other broadband suppliers.

Vodafone TV puts the company in a strong competitive position. It should be able to grow its share of the broadband market. Yet even with stellar growth it will struggle to match Sky’s satellite reach. It goes places fibre doesn’t.

Fibre is important to Vodafone TV. You need a solid, fast, reliable connection for it to work.

Chorus and the other fibre companies have graphs that show how fibre uptake took-off. It happened first when Spark introduced Lightbox. Then, again, when Netflix opened in New Zealand. There were two clear inflection points.

Inflection point

It wasn’t only uptake. The graphs also showing how much data users download. These also turned corners at the inflection moments. Expect a similar effect as Vodafone TV kicks in.

Close Vodafone watchers may have spotted a theme with the company in recent months. Vodafone group product director Sally Fuller was in town earlier this year. The main thrust of her presentation was that we’re moving to: “Everything-as-a-service”. She says the ownership of things is on the way out, instead we buy outcomes.

This is something you could miss in Vodafone’s TV announcement. Yes, it is a flash new product. It has the capacity to delight customers and win business from rivals.

At the same time it is another step closer to “everything-as-a-service”. This is the future world Vodafone refers to in its advertising. Vodafone TV is more than a product, it is a strategy.

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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.

Downloads

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. ↩︎