Media Guardian: Sky Sports to replace numbered channels and slash prices in revamp

Story from Media Guardian:

Sky is scrapping its numbered sports channels and replacing them with themed offerings focused on specific sports – led by football, golf and cricket – as it combats falling viewer numbers with a branding revamp and a cheaper viewing package.

The retirement of Sky Sports 1,2,3,4 and 5 and the introduction of a new package two-thirds cheaper than current prices represents a major shakeup of the strategy that has made Rupert Murdoch’s Sky a pay-TV powerhouse.

The new offering will result in the launch of themed channels, like Sky’s existing dedicated Formula One channel, for its top-flight sports including football – which will get two channels – golf and cricket.

A new channel, Sky Sports Arena, will host other content including rugby and tennis.

A key part of the strategy is that it will let Sky entice new pay-TV subscribers reluctant to fork out up to £49.50 for its cheapest sports package.

The new strategy will allow Sky to charge £18 for its cheapest package – although the whole Sky Sports bundle will remain a costly option.

The cost of sports rights has spiralled in recent years with Sky paying £4.2bn in its latest Premier League TV deal – 83% more than the previous deal and almost £11m per game – while viewing has dropped significantly.

Some analysts ascribe this drop to the rise in popularity of cheaper streaming services, such as Netflix and Amazon, which with prices starting at£8 a month may be creating an expectation among consumers that pay-TV should be cheaper.

“There are a range of reasons why Sky would be looking at such a big structural change to its pay-TV service,” said Richard Broughton, a director at Ampere Analysis.

“In part it could be a response to the ongoing question of viewing numbers to traditional pay-TV sport. There is also a demographic shift where people, especially younger groups, are reluctant to spend so much. Get reluctant to spend groups, such as millennials, in on cheap packages and look to up-sell at a later date.”

Sky has put the viewing dip over the past year down to airing more games per season, many of which feature less popular clubs, the relegation of clubs with relatively large fanbases such as Newcastle and Aston Villa, and the BBC’s live Rio Olympics coverage.

The move also ties into the aim of Jeremy Darroch, the Sky chief executive, to entice the 10m budget-conscious Freeview households to try pay-TV.

The company has been targeting viewers who don’t have pay-TV with cheap options such as its £9.99 Now TV set-top box.

Sky’s Now TV internet service, considered a response to the challenge posed by the arrival of Netflix, broke the monthly sports subscription model on which the company built its business over more than two decades, offering sports channels on a pay-as-you-go basis for the first time.

Now TV sports day passes have proved popular for fans looking to dip in for one-off big events (£7), but a one-off monthly pass at £34 remains a big outlay for those reluctant to sign up for traditional pay-TV packages.

“More and more Freeview households are starting to spend on pay-TV in some way, 45% take a subscription service but it is mostly Netflix or Amazon,” said Broughton.

“Reducing the monthly TV package cost could also allow them to reduce the Now TV monthly pass cost to attract more occasional viewers without cannibalising the higher-value satellite TV base.”

Sky only added 40,000 subscribers in the UK in the three months to the end of March, compared with 70,000 in the same period last year.

Broughton also suggests that by having genre-themed sports channels each will effectively act as a “profit and loss” account for the popularity of each sport and therefore what the rights are really worth to Sky.

For example, tennis is not thought to have its own dedicated sports channel in the new set-up.

It is understood that the TV rights tender for the US Open and ATP Tennis Tour has just been issued.

The new strategy could signal that Sky, which last year dropped its coverage of the US Open tennis tournament after 25 years, may have determined it will not look to offer a huge bid to renew the ATP Tennis Tour rights.

The Sky Sports Mix channel, which Sky uses to showcase sport to its wider subscriber base by offering it free to basic package holders, will be continued.

The overhaul of the sports strategy marks the latest move by the pay-TV giant to make its service as accessible and flexible as possible for viewers.

In January, the company said it is to make its full TV service of hundreds of channels available without the need for a satellite dish for the first time.

Sky said that it will launch a broadband-delivered TV service next year which will enable it to compete for 6m households of potential customers across Europe who cannot, or will not, have a satellite dish.

© 2017 Guardian News and Media Limited.