More Flexible SKY Packages Is A Stupid Idea (Premier League Pass Edition)

The SKY TV sports package costs $49.58 per month for basic and an extra $26.45 for the sports channels. That’s $912.36 a year before My Sky and whatever extras you want with your package.This does not mean you get 54 channels at a “cost” of $1.41 per channel!

You would not save any money if you could “just” get sports or the rugby. In fact, because you make it clear you’d previously pay over $76 a month for SKY, you have already revealed to SKY that you will pay up to that much for pay TV each month.

This is basic stuff. The price of each channel will change to maximise profits for fans of that particular channel. If consumers could pick and choose what channels they want it would be fuel for even more Kiwi whinging. SKY Sport is more likely to be $70 a month by itself, for example.

Consumer choice would actually decrease because fixed network costs like programming costs are split over subscribers. Options are valuable – and because you’d only have the few channels you pick and choose instead of 54, you’d have lower utility from television. More content is better.

In fact, niche channels would probably disappear. Packaging news channels together for example means they don’t need to compete aggressively on price. They can spend money on a better product.

Administration costs under a-la-carte pricing would be far higher. Consumer welfare would be lower. You would not save any money! Can I make that any more clearer? You would not save any money!

The comments on this Stuff article display economic ignorance par excellence. Who would have thought it? Also, while some channel prices would go down because they’re not as valuable, have you thought about what would happen to content production?

You know, the content is the reason you get pay TV. If channels have to compete amongst each other aggressively on price, then they have lower profits with which to invest in new content. Oh snap – the quality of content on your favourite channel is likely to decrease under a-la-carte pricing.

This includes less money available to bid for rights for the channel content you signed up for. Yes – some channels are hardly watched at all, but it doesn’t mean you’re subsidising other channels. It means at the margin more subscribers are part of the network which drives down average total costs and lowers your monthly bill.

If SKY actually listened to their subscribers, who despite moaning continue to show through revealed preferences that they value the content they consume enough to spend almost $1000 a year obtaining it, they would not be able to offer any of the content they currently do.

They certainly would not have been in a position to put up a solid bid for English Premier League rights – which have been awarded to a higher bidder as is the EPL’s perogative.

All of the people commenting on that Stuff article forget that SKY has spent an enormous sum of money building a network, becoming an NZ success story and enabling you to get access to content that you sure as hell would not have been able to consume if it was still just channels 1, 2, 3, & 4.

If enormous numbers of people cancel their SKY subscriptions because of EPL no longer being available, they’ll internalise the costs of that decision on their bottom line.

Some days I can’t believe how silly some people are. We should be happy that people take risks and put their money into big upfront costs that enhance consumer welfare over time.

It’s good stuff that there’s more competition in content consumption, it’s something to celebrate instead of having a whinge about in the Kiwi fashion. Comments like “subscribers should be setting the agenda” are so ignorant that I wonder if there is a relationship between economic ignorance, political ignorance and what I call “commercial ignorance” – not knowing that high fixed costs + low variable costs includes the need to recover fixed costs before turning a profit!

I think Premier League Pass is an interesting experiment. But the pricing we’ve already heard of $12.5 per month is almost 9 times what the silly people commenting on stuff think a channel “really costs bro”. (The $1.41 figure).

I am actually quite interested Premier League Pass, especially if they get the French La Ligue. I wouldn’t subscribe to SKY television because I don’t value anything it offers and the opportunity cost of watching TV is writing informative blog posts like this infused with a healthy dose of realistic thinking.

Forget about the people who will ring up or complain on social media trying to get a discount, I feel sorry for the call centre staff at SKY TV for the next couple of weeks.

They will get exposed to the very worst of Kiwi cheapness and unwillingness to recognise a sweet deal which they would never acknowledge because they are ignorant of how millions of dollars in programming expenses alone gets transformed into a monthly bill that would not be paid if it did not deliver at least as much value to the people paying it.

Just like Kiwis refuse to accept that water costs in what we forego in alternative uses like irrigation, Kiwis refuse to accept that companies should be able to make a profit.

SKY Can Pay For NZ On Air

I don’t think SKY should be regulated because of the enormous alternative sources of TV available to anyone with broadband and a torrent client.

I’m also not a fan of direct regulation like making SKY offer individual channel selection so people don’t have do buy a basic package if they only want to watch the rugby.

But all monopolies eventually attract the attention of regulators. When the National government eventually exits, SKY regulation is definitely on the cards.

When regulators see a big monopoly, they act almost out of a compulsion to justify their existence.

One of the concerns about massive media companies is the difficulty of funding public broadcasting because a lot of great content has lower commercial value and small audiences.

The truth is a lot of public broadcasting is rubbish, but the diamonds in the rough are worth the trouble of maintaining public funding of music, television and radio.

When the SKY regulation negotiations begin, offer them the opportunity to underwrite part of NZ On Air in exchange for less aggressive regulation.

That way two birds are killed with one stone. According to the NZ On Air Annual Report their funding expenditure in 2011 was $130 million.

SKY obviously can’t underwrite all of that, that would be ridiculous. But for each commitment to more public broadcasting funding, they can get less regulation.

The current “hands off” policy taken by the National government ignores the opportunity for a quick win. Even SKY subscribers don’t like SKY and moan about the lack of quality content and how everything good is on SOHO all the time.

I’m not going to talk about how SKY needs to earn a return for the network it has built. It clearly is recovering the cost of building a network. This isn’t about SKY making money, it’s about shifting a chunk of government expenditure to an industry that consistently lowers the quality of broadcasting content.