The Igloo Initiative
// January 25th, 2012
Intriguing television alliances are not always confined to Survivor. The latest gossip down our way is about the joint venture between Sky and TVNZ to bring a new pay television offering to market by the middle of next year.
Code-named Igloo, this new service will make use of Sky’s old UHF frequencies to broadcast the existing Free to Air channels plus up to 12 pay channels into Kiwi homes. Reports suggest that this package will cost subscribers around $25 a month, about half the current cost of Sky’s entry-level Startup package.
Sky will own 51% of this new venture while TVNZ takes a 49% stake, reflecting perhaps the relative values of the ingredients each broadcaster brings to the table.
Consumers will need a new set-top box to receive the Igloo service, but not a satellite dish; this is a Digital Terrestrial Television service, with signals broadcast from local transmitters around the country and received in the home via UHF aerials. Those who are currently able to receive Prime or FOUR over the airwaves (rather than by satellite) should easily be able to receive Igloo.
There are definite benefits to both players in this unexpected alliance. Ever since Sky transitioned its last analogue subscribers to digital satellite services, the paycaster has been pondering alternative uses for the UHF frequencies which up until 1997 were its only broadcasting platform. The NZ Government enforces a “use them or lose them” policy for scarce resources such as broadcasting spectrum; if Sky didn’t use the frequencies they would have been obliged to hand them back (and the frequencies might have subsequently found their way into the hands of a competitor).
Igloo also represents a number of strategic benefits for Sky:
- the company becomes its own low-cost competitor, removing that entry path for other players
- the partnership with TVNZ is a useful response to those who argue that Sky has a monopoly position in NZ television
- as New Zealand transitions to digital, the Igloo offering represents a more affordable alternative to a full Sky subscription as well as perhaps being more attractive than the basic Freeview option
As for TVNZ: the company has been trying for some years to regain a foothold in Pay Television (TVNZ owned a strategic shareholding in Sky Television many years ago, before government policies of the time saw the shares sold off). Our state broadcaster recognises that most of the television revenue growth of the past decade has been in subscription fees, and wants access to the pot. That desire was one of the main driving forces behind TVNZ’s investment in TiVo; unfortunately that ultimately-failed venture was caught in a Catch-22 loop (too few subscribers = little reason to supply expensive programming = little to attract subscribers).
And what about TVNZ’s involvement with Freeview? In reality, that particular relationship ceased to be important the moment that TVNZ gained permission from the government to add TVNZ 6 and TVNZ 7 onto the Sky platform. Up until then, the only way to receive those two channels was via Freeview; once the channels were readily available on Sky, there was no compelling reason to go with Freeview except for the obvious one, the closedown of analogue channels (happening in 2012 and 2013).
There’s another key player who also benefits from the Igloo initiative: Kordia, state-owned provider of transmission sites and broadcasting equipment. Sky’s satellite-delivered services provide little revenue opportunity for Kordia; on the other hand, ongoing terrestrial broadcasts from local sites around the country are a nice little earner.
Igloo will have negligible impact on marketers, at least in the short term. It is just another platform for delivering existing content. If there are any new TVNZ pay channels that are Igloo-only (which seems unlikely), they’ll only attract small audiences at first anyway. Nielsen will have their hands full with yet another variant to plug into the Peoplemeters universe (“How do you watch TV One? Analogue? Sky satellite? Freeview satellite? Freeview Terrestrial? Telstra Cable? Igloo?”) but that’s about all.