Sky gets limited?

Media students always seem to baulk at the idea of studying numbers, yet understanding the business models of production, distribution, and exhibition are crucial to anyone contemplating entering any of the creative industries.

News breaks that OFCOM, the UK media regulator, is planning to cut the prices that Sky, Rupert Murdoch's satellite outfit, can charge to third parties, like Richard Branson's cable-based Virgin Media, for hosting Sky channels like Sky Sports 1. 

This story is a classic case of how the media operates in what is often tantamount to a strange act of parasitic content sharing and money shifting.

The linked BBC article covers the finer details well, so I won't attempt to repeat those here, but do have a look at them.

The headline issues are as follows: 

• Sky paid a fortune to the Football Assocation et al for the rights to show football.
  
• In addition, there are production costs for filming, editing, promoting and commentating on matches. This is a cost Sky picks up. 
• It recuperates some of this cost via in-match advertising plus the monthly subscription fees it charges to viewers. So, there's a clear relationship between production and exhibition, in terms of Sky itself, which not only produces the content but owns the satellites, dishes and decoder boxes that allow people to watch its content.
• However, in order to maximise viewers, avoid claims of monopolizing the market, and recoup more of it initial outlay, Sky effectively distributes itself, reselling and distributing its channels with other media outlets. Virgin Media is a good case in point.
• This creates an interesting symbiotic relationship between Sky and those who appear to be its competitors. Although it may seem to fly in the face of business orthodoxy, Sky is not giving away its content, nor is it diluting its brand. It is expanding its distribution channels by re-selling itself, at a profit, to companies serving non-Satellite based markets.
• The risk in terms of having its wholesale prices cut, as OFCOM wants, is that the price for various channel packages will fall to a point where Sky is only just covering its costs. For a business, especially in a recession, this is bad.
• However, if seen as an opportunity, given the right marketing mix Sky could see subscriber numbers rise, and in turn be able to charge more for advertising; except, we're in a recession and advertisers don't have any money to spend in the first place.

At the moment Sky's response is to say it will mount a legal challenge. However, it seems possible that OFCOM will have its way. Maybe Sky knows this, but hopes the cost of dragging out a case might be less expensive than seeing re-sale prices plummet at the bottom of the recessionary economic cycle. You see, the world of business media is complex, inter-connected, and central to what we get to watch.

Still think the numbers game is tedious? Think again. It drives the majority of decisions affecting all aspects of what we see, read, hear, and watch. 

To put it another way: I may not be an engineer or any good at DIY, but I can still appreciate the genius of engineering when I peek under the bonnet of my car and note the many complex sequences that occur, allowing me to get from A to B in comfort and ease.

The pipe's the limit for SKY

Rupert Murdoch's Sky has revolutionised TV watching in the UK, bringing multi channel TV to the masses, in ways that seem unimaginable for those of us who remember the heady days of growing up with two BBC channels (1+2) plus ITV. 

In those days, the term 'water-cooler TV' did mean millions watching the same event, because choice was so limited.

Now, we live in an age of increasingly niche audience viewing habits, where even the long-running soaps have seen their audience figures decline comparatively.

From its initial offerings Sky has grown to dominate the pay TV market, sucking up many sports rights along the way, and transforming the fortunes of players and the experiences of audiences. Today's sports coverage is far slicker and soccer players' fees far more lucrative than anyone could have envisioned.

Technologically, Sky has continued to innovate, offering a hard disc recorder (Sky+), high definition variants, and now it is making another push into a new frontier.

Since the BBC launched the iPlayer more than a year ago, TV pundits have wondered how long it will take for a full convergence between online usage and TV viewing to occur.

Late last week Sky announced that it was now launching the Sky Player. For a monthly subscription that will be less than the cost of a satellite feed, users can watch live channel packages online, as well as download movies and other entertainment shows, using a proprietary player, that uses Microsoft Silverlight as the backbone for its Digital Rights Management. 

Mac users are catered for, but without the downloading facility for movies and entertainment. The Sky website says this will be coming in due course. I'm not sure if Mac users get a discount for the reduced service, but I intend to find out this week and will report back.

Either way, it represents a fascinating acknowledgement that audience tastes are changing and that for some people online delivery works better. This might be because people want to take downloaded shows to work, users spend more time online so this might be a way of generating revenue from those deserting the traditional sit back approach of conventional TV, or it might represent a chance for those in love with the service to maintain viewing habits wherever they might be.

What is certain is that the combination of advancing broadband availability, falling subscription costs, and rising audience acceptance of media delivery via online channels, is likely to fuel a rise in the viewing of moving image content on computer screens.

Is there a spanner in the works? Well, possibly there is. British Telecom (BT) is complaining that the media regulator, OFCOM, has capped the rates it can lease its lines to third parties at too low a rate. It's claiming this will hamper investment in new broadband infrastructure. The government has seen fit to bail out our banks. It will be interesting to see if it's prepared to invest in the backbone of our country's technological improvement.