TMCnet Feature
July 26, 2013

Sky 'Now TV' Shows Growing OTT Video Importance

By Gary Kim, Contributing Editor

If new moves by British Sky Broadcasting are any indication, Google (News - Alert) is onto something with its new Chromecast device. Sky has just introduced a small £10 ($15) box that turns a standard television into an Internet-connected device.

Designed to bring Internet content to standard TVs (the device requires a TV with an HDMI port), the disruptive element here is that the new device competes with existing boxes that cost two orders of magnitude more than the new box.

The “YouView” box, for example, costs £299 ($460), and is marketed by BT (News - Alert), TalkTalk, the BBC, ITV and Channels 4 and 5.

The Sky device supports Sky’s “Now TV” service, offering for-fee access to Sky Sports and Sky Movies, plus access to some Web services such as Facebook (News - Alert) and Spotify.

The move comes as Sky is finding on-demand video and over-the-top (OTT) content subscriptions are growing fast. Sky reported a 300 percent increase in Sky Store (on-demand) revenue in the most-recent quarter.

Sky also says it has 166,000 customers paying £5 ($8) a month for the “Sky Go Extra” service that allows content download to mobile devices.

Notably, the new box – said to be a modified Roku device – also will allow Sky to potentially sell services to non-subscribers who want access to Sky movie or sports fare.

The Now TV service and adapter show how nuanced the matter of over the top TV is for a video distributor. On one hand, Sky grows the addressable market for its services, as it can reach households that are not Sky subscribers, and may not want to subscribe to traditional subscription services.

Sky also provides more convenience to its own subscribers, and creates a platform for upselling on-demand content.

On the other hand, Sky also allows access to some third-party content that essentially competes with Sky’s own offerings. Of course, Sky has been careful not to enable it competition. Netflix, for example, is not available using the box. But Sky clearly believes OTT delivery, especially of its own content, is becoming more important.

At least for the moment, Google’s Chromecast is less an immediate content sales enabler for Google, and more a way to increase the size of its advertising audience. But Google is playing other angles as well.

Chromecast uses the Chrome browser, Android (News - Alert) smartphones and tablets, or Chromebooks as the control device (think of the remote control function, combined with the search function and the channel guide).

That makes Chromecast more important to Google as a way of creating an entertainment ecosystem, using the existing “dumb display” and adding intelligence using devices people already own.

Edited by Alisen Downey
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