BSkyB CFO Touts Company's Upcoming Internet TV Service

3:40 AM PST 05/29/2012 by Georg Szalai
Chris Ratcliffe/Bloomberg/Getty Images

Andrew Griffith sees NowTV, an answer to Netflix and Amazon.com's Lovefilm, as an opportunity to reach some of the 13 million British homes that don't get pay TV service yet.

LONDON - BSkyB CFO Andrew Griffith told an investor conference here Tuesday that the pay TV operator's upcoming broadband TV service will help the company attract some of the 13 million U.K. homes that don't get pay TV service yet.

The so-called over-the-top service, dubbed NowTV, is scheduled to launch in the next couple of months, he said. BSkyB, in which Rupert Murdoch's News Corp. owns a 39 percent stake, had previously only said that the service would get its start this summer.

NowTV, which is seen as an answer from an established TV player to Netflix and Amazon.com's Lovefilm, is expected to start off with films, with sport and entertainment content to be added over time. The CFO confirmed that consumers would have the option to get less TV content than in typical pay TV bundles and without long-term contracts, but with "some of Sky's high-quality content." That means more flexibility and lower prices than pay TV subscribers generally get, but also less of a content volume discount, he signaled.  

Griffith said that the growth in Web-connected devices provides a growing opportunity to distribute BSkyB content on new platforms in a way that he said is complementary to the company's existing offers. As a "fully flexible over-the-top offering," NowTV will go after the 13 million U.K. households without pay TV service, he said. "It is a low-cost way to grow the overall pay TV marketplace."

If not, NowTV could simply prove that there is "more life" in the pay TV market than is currently understood, the BSkyB CFO said. Griffith added that as a big aggregator of content, "the proliferation of platforms…can only be a good thing" for BSkyB. "It is a substantial opportunity for this business." He acknowledged that "clearly it is going to be competitive, but the world of Sky has always been competitive. For me, that is a world of opportunity."

Asked about the risk of cannibalizing BSkyB's own subscriber base with NowTV, Griffith said: "We always had to make business trade-offs…Those trade-offs exist within the marketplace today." He added that BSkyB has "happy customers with one of world's lowest churn rates" and argued that NowTV is "quite a different" product.

Asked why there has not been more cord cutting among BSkyB customers so far, Griffith argued that the company has a "deep understanding" of its customers, and they in turn understand that popular content is often found on pay TV. For example, Glee last year moved to BSkyB's Sky 1, and the company also offers HBO favorites on its Sky Atlantic network. "It's about the content, stupid," Griffith said.

Griffith also emphasized that the average Brit watches 4 hours and 2 minutes of TV a day, with 90 percent of viewing happening live.

Asked about U.K. media regulator Ofcom's continued review of whether BSkyB is fit to hold a broadcast license amid the phone hacking scandal that has engulfed News Corp., Griffith reiterated that company's previously articulated argument that it is an independent company with its own track record of contributing to the U.K. media industry. "It's that track record and our broader contribution that they should focus on," he said. 

Asked about content costs, the BSkyB CFO signaled that his firm is in a better position than U.S. pay TV operators, which have dealt with rising programming costs and debates over rights to offer content on new platforms. "We haven't seen much over the last few years" in terms of major cost inflation, Griffith said, adding that BSkyB has included rights to distribute content across platforms in its content deals.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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