Strategically, said Guy Bisson, research director, television, at IHS Technology, the core aspects of this deal are not the potential synergies and cost savings that the enlarged group will have, but the competitive positioning and opportunity for roll-out of multi-service offerings across the three markets.
In his analysis, Bisson cited Sky Deutschland as the jewel in the deal with Sky Italy providing an opportunity to roll out triple-play services. And even though both Sky Deutschland and Sky Italia already have standalone over the top (OTT) services, Bisson added that a core plank of the strategy for the new Sky entity will be a roll-out of a unified standalone OTT offering across the markets, modelled on BSkyB’s increasingly popular NOW TV.
This, said Bisson, would will give Sky a strong defensive position against OTT entrants. “With OTT services like Netflix and Amazon easily porting their business model across international borders, the immediate threat to traditional operators is the ability of OTT to rapidly build international scale,” he said.
“A core plank of the strategy for the new Sky entity will be roll-out of a unified standalone OTT offering across the markets, modelled on the UK's NOW TV. This will give Sky a strong defensive position against OTT entrants. Further, Sky will roll out its triple-play strategy across the three markets, with a particular initial focus on Italy where there is no cable competition and limited IPTV development.”
Interestingly Bisson went against the popular view that the deal would see the effective creation of an entity known as Sky Europe that as a combined force could negotiate more advantageous content deals.
However, Bisson asserted that BSkyB managers had admitted on the morning that the deal was struck that the merged entity was unlikely to gain an additional advantage in the acquisition of premium sports rights, particularly football such as the English Premier League and La Liga in Spain or first window rights to Hollywood movies. He noted that such rights are typically awarded on a territory-by-territory basis and Sky faces strong competition from companies like BT, Mediaset and Deutsche Telekom.
However, Bission was confident that there were areas where the combination could make its extended footprint work. He said: “Firstly, in negotiating rights for competitions which are not in the top tier of premium events in each country and where rights holders may be open to a multi-territory deal. Fox has already made some moves in this direction by acquiring multi-territory rights to the German Bundesliga, the MLB and NFL. Other sports like rugby, ice hockey and basketball could offer some potential. Second, Sky could position itself as a partner for sports rights holders, creating the coverage and handling the distribution of the event worldwide. This is a strategy 21st Century Fox is already following with Dutch football, having bought into the marketing company behind the league and selling international rights. BSkyB will show the Eredvisie in the UK next season. This approach provides a defence against inflation of rights costs.
“Third, Sky has shown itself ready to build the brand of some sports by giving them greater TV exposure. The Premier League could arguably fit into this category, but a more recent example is cycling, where Sky finances the UK-based professional team which has its name and has been heavily involved in raising the profile and success of the sport. Rupert Murdoch has never been averse to buying up and reorganising sports to make them more amenable to exploitation on TV. The new European business could be combined with Fox Sports in the USA, Asia and Australia and Star Sports in India to form a global platform. Formula One, an event typically well suited to pay-TV, is rumoured to be up for sale and is an obvious candidate for acquisition - though it is already an established and therefore expensive event.”