7 Dec 2023

Neon at a Crossroads

From Widescreen, 12:00 pm on 7 December 2023

Sky’s price rises show that competition for content is a bigger concern for them than competition for eyeballs, says Dan Slevin.

Still from season five of the TV series Fargo featuring Jon Hamm

Jon Hamm in season five of Fargo, currently streaming on Neon. Photo: Neon

Yesterday Sky TV announced that they were raising their prices for their Neon streaming service and also introducing some advertising and were greeted by a flurry of criticism and some people even screenshotting and posting their cancellation notices.

Even I was brought in to comment about it on Nights last night and I’ve been thinking a lot since then about how we are not only poorly served here in Aotearoa compared with the rest of the world but how the streaming economy globally has ultimately been amazing in the short-term, but disastrous in the long-term.

I’ll have more to say on the trends that I see coming in future columns, but I wanted to get my thoughts about the current situation down now.

As I mentioned last night, I’m more exercised by the second big increase in the monthly charge for Sky Sports Now than I am about Neon. Fifty bucks a month is now a huge chunk of change for a service that has the worst interface and poorest picture quality of any of the streaming services available in this country.

Every month that payment grinds my gears but every month I still pay it because there is no legitimate alternative if you want to keep up with the Premier League or the Wellington Phoenix. That’s a bigger addiction for me than movies.

Wellington Phoenix players congratulate goalkeeper Alex Paulsen after his penalty save against Perth Glory.

Wellington Phoenix players congratulate goalkeeper Alex Paulsen after his penalty save against Perth Glory. Photo: Photosport

Placing ads next to premium paid-for titles would once have been unthinkable – unthinkable for an industry that’s really only about seven years old – but there is a trend to add advertising-supported pricing tiers as the likes of Netflix and Disney experience price resistance from customers and need to discourage churn.

Personally, I find the lack of a completely ad-free experience to be an odd choice but Sky have decades of experience selling advertising on premium offerings like All Black tests and presumably they know what people will tolerate. I have a friend who still finds it extraordinary that Sky would annoy us with advertising on a service that some people pay over a hundred dollars a month for but here we are.

Compared with their Sky Sports monopoly, I expect the Neon arm of Sky TV is relatively small potatoes. It survives up against its own mega-competitors like Netflix and Disney because of the access it has to premium TV content from suppliers like HBO, Hulu, Showtime, Starz, Paramount+, etc. They cherry pick the biggest hits from those services – that don’t currently have a local offering – and they can afford to pay relatively high prices for those rights because those shows are first and foremost for their satellite channels: UKTV, SoHo, BoxSets, etc. Being able to stream those shows on Neon is just gravy at this point.

Still from the TV series Yellowstone with Kevin Costner

Photo: Paramount+

But what if Paramount+ decided to start operating in New Zealand as it has in Australia, bringing all the Yellowstone spinoffs with it? Would the relatively small market here provide enough subscribers to compensate from the lost rights sales from Sky? It’s doubtful.

Warner Discovery – owner of the colossal HBO brand as well as the DC comic book characters and classic Warner animation like Bugs Bunny – already has a channel here and a streamer. ThreeNow currently has the original Tim Burton Batman playing on its service but, otherwise, has yet to take advantage of corporate synergies that might be available in terms of content.

Movie still from the 1988 Tim Burton version of Batman starring Michael Keaton

Photo: Warner Bros.

Again, it’s probably more lucrative to sell those rights to Sky than it is to try and sell advertising against those properties and the pushback over the relaunching of their own premium streamer – from HBO Max to just Max – suggests that they won’t be coming here any time soon.

But, and it’s a big but, the threat of moves like that remain and they must be haunting any future negotiations over rights. That’s leverage.

Hence why Sky used the phrase “investing in quality content” when they announced their changes yesterday. It’s very likely true but you also can’t escape the feeling that the Sky board are juicing their margins at a time when there are interested parties reportedly wanting to purchase the company.

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