Could BSkyB's Now TV Disrupt the Pay-TV Business Model?

by Ross Fadner, Jul 16, 2012, 5:34 PM

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BSkyB, News Corp’s UK-based pay TV operator, is set to challenge the likes of Netflix and LoveFilm with a new streaming TV service that launches in the UK Tuesday on PC, Mac and some Android devices. Analysts warn that the new service, called Now TV, could disrupt the established pay-TV business model of bundling channels together to sell at a hefty monthly subscription fee if it is successful.

Now TV will only be partially rolled out at launch, providing users with access to Sky Movies content with 600 films and 11 channels for a no-commitment subscription fee of approximately $23.50 per month, or a pay-per-view option of around $5.50 per film.

In the coming months, Now TV will gradually expand its offerings to include Sky Sports content as well as Sky1, Sky Arts and Sky Atlantic. Sky also plans to make Now TV available on other devices including iPhone, iPad, Microsoft Xbox 360, Roku and PlayStation 3.

BSkyB, which has 10 million subscribers, says it is targeting the 13 million households in the UK that don’t subscribe to pay TV service -- many choosing not to because of its high price point.

However, while Now TV is a cheaper alternative to the cheapest Sky offering that includes films, which currently sells for around $58.50 per month, streaming content services like Netflix and LoveFilm are cheaper still, charging monthly subscription fees of between $8 and $11 per month (approximately). BSkyB is hoping that the quality and variety of the content on Now TV trumps cheaper services offered by competitors.

As Sanford C. Bernstein Analyst Claudio Aspesi tells The Hollywood Reporter, Sky “needed to balance protecting the bundling of premium and basic content, so prices could not be too low," but it also "could not price so high that [Now TV] would have no impact on Netflix and LoveFilm.

However, Ted Hall, an analyst at Informa Telecoms & Media, warns in a blog post: "Now TV also represents a potentially dangerous move away from the bundled approach to selling pay TV – the packaging of popular channels with those that are less desirable -- towards an a-la-carte model.”

Why is that?

“With Sky Movies -- and later, Sky Sports -- now available without a basic-tier subscription, as well as on a pay-as-you-go basis, consumers are finally being introduced to the cherry-picking model they always wanted, the model [pay TV] operators have typically resisted for fear of disrupting the established economics of pay TV,” he writes.  

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