Sky Sports and the Challenge of Streaming Platforms

Last year, Sky made the decision to scrap its numbered sports channels and have them replaced with themed offerings that were centered on specific sports, majorly football, cricket, and golf. This move was made as a response to the falling viewership numbers as well as a branding revamp that produced cheaper viewing packages.

The move saw the retirement of Sky Sports 1,2,3,4, and 5 and the subsequent introduction of a new package that was considerably less expensive. It represented an unprecedented shakeup that brought a myriad of changes to the system that made the Rupert Murdoch-owned Sky a major TV powerhouse.

The new offering brought about the launch of themed channels such as Sky’s Formula One dedicated channel, and channels that were focused on top tier sports such as golf, cricket, and football (which was the only sport that had two dedicated channels). A new channel, known as Sky Sports Arena, was also launched with the goal of providing content related to other sports including tennis and rugby.

A major aspect of this strategy was that it will give Sky the opportunity to draw new pay-TV subscribers who were unwilling to pay a whopping £49.50 for the cheapest of all its sports packages. Under the new strategy, Sky was able to charge just £18 for its cheapest package, although the amount of money that subscribers will have to pay for the access to the whole Sky Sports bundle was still quite costly.

In recent years, there was a major spiral in the price of sports rights, with Sky forking out £4.2bn in its latest deal with the English Premier League. This new deal costs almost 85% more than what the previous deal commanded, and the rates amounted to about £11m per game, while viewership has also dropped significantly.

A vast majority of technical analysts have attributed the drop in viewership to the rise in popularity that various streaming services have encountered. The advent of streaming platforms like Kodi, Netflix and Amazon have greatly affected the viewership numbers of many channels, and more and more people are making the switch from paid television to streaming. With prices of streaming services ranging around £8 a month, expectations have started rising that paid television should ideally be cheaper.

“There are a plethora of reasons why broadcasting companies such as Sky would be considering making huge structural changes to their paid TV services”, said Richard Broughton, a director at Ampere Analysis.

“It could be due in part to the ongoing issue of viewing numbers that traditional paid TV channels are experiencing. There has also been a demographic shift due to the fact that a lot of people, especially youths and millennials, are becoming increasingly reluctant to pay so much for the rights to view their favorite channels. 

One of the factors that Sky have blamed for the dip in viewing numbers over the past years is the fact that more games per season that feature less popular club. There is also the issue of the relegation of clubs that have considerably large fanbases and the live coverage of the Rio Olympics by the BBC.

The new structure ties into the goal of the Sky chief executive to entice over 10 million households to give paid TV a try.

Sky has been using options such as its Now TV set-top box to try to target viewers who don’t make use of paid TV.

Sky’s internet service- known as Now TV- has been considered by many as the broadcasting company’s answer to the challenge posed by streaming services like Netflix and Kodi (as a matter of fact, many UFC Kodi add-ons are now offering live streams). It broke the ubiquitous monthly subscription package on which the business structure of the company has rested on over the years and now offers sports channels to subscribers on a pay-as-you-go basis.

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