Video bundling deal reinforces duopolies

A bundling deal between Vodafone and Sky Television looks set to entrench commercial alliances in the converging world where telecommunications meets TV.

The marketing push means that Vodafone customers with an "Ideal" or "Ultimate" home pack who pay their Sky subscription through Vodafone get free use of a MySky HDi digitalvideo recorder, worth about $15 a month.

The expansion of the bundling deal is part of a growing alliance between Sky and Vodafone.

Sky Television chief executive John Fellet said that the MySky HDi deal with Vodafone made sense given Vodafone's reputation for strong marketing.

The deal also made Vodafone and Sky's customers more "sticky" - less likely to move on. Reducing the "churn" is important for telcos and pay-TV operators because it costs a lot in marketing to attract new customers.

Sky insists that it is not making any exclusive deals and that it is negotiating with other players.

But early signs are that the duopolies in TV and telcos are being carried over into the new converged world.

Telecom has joined forces with TiVo to deliver the digital video recording service, which has broadband capabilities.

TiVo in Australia and New Zealand is owned by Hybrid Television Services, which is one-third owned by TVNZ and two-thirds by the Australian Seven Network.

The alliance is essential for TVNZ to profit from allowing users content that can be downloaded and linking traditional television with digital content on computers.

Telecom offers unmetered broadband that allows TiVo customers to download unlimited numbers of programmes.

"Telecom and Vodafone are jockeying for position and a stake in the growth for video content," said Ernie Newman, chief executive of the Telecommunications Users Association of New Zealand.

While TVNZ and Sky both say they are aiming to have an unfettered market, the Sky deal is part of a different trend - the formation of two alliances: Vodafone and Sky against Telecom and TiVo.

TWO ALLIANCES

Vodafone and Sky: Vodafone offers an eight-channel Sky service on its mobile phones and Vodafone customers can also pay Sky bundled in with their phone bill. Now it is offering Vodafone fixed-line or broadband customers free use of MySky HDi.

Telecom and TiVo: Teaming up to deliver the digital video recording service with broadband capabilities. TVNZ owns a third of TiVo in Australia and New Zealand.