COMMENT:
On Friday afternoon, Sky announced the appointment of industry stalwart Steve Bayliss to take over the marketing reins at the business.
During his long stints at Air New Zealand and Foodstuffs, Bayliss established a strong reputation as a marketing boss adept at the age-old art of convincing consumers that he was selling something worth buying.
But Sky poses a different challenge. In taking this job, Bayliss has knowingly entered a business fighting on numerous fronts to justify its continued prevalence in the Kiwi living room.
While good marketing won't necessarily solve all issues facing Sky, it has never been more important for Sky to get its story across in a way that resonates with the increasingly disaffected audience that has no qualms about bashing the business on social media.
Here are a few of the key messages that Bayliss will have to get across as he and new CEO Martin Stewart look to inject some fresh thinking into the business.
Home of sport?
Over the last year in particular, Sky's iron grip on its claim as the "home of sport" has loosened substantially. While a Sky subscription would previously give fans access to virtually every sporting code with stature, viewers now have to go elsewhere to watch some major events. The Rugby World Cup, The Premier League and Formula 1 have all been picked up by Spark, leaving Sky with a few sizeable gaps.
This is not to say that Sky doesn't have a great lineup of sport. It still boasts the most comprehensive sporting coverage across rugby, cricket, football, netball and other sports. The last week in sport was a classic example. When two Champions League miracles happened one day after the other, there was only one place to watch them.
If you want to see the big teams of Europe slogging it out in the Champions League, the weekly Super Rugby clashes or the fixtures in the ANZ Netball Premiership, you still need a Sky subscription.
Sky needs to show it still has sporting swagger by shifting the conversation from the codes it has lost to those it still has. In doing so, it will be able to remind the public that it remains unchallenged in this market when it comes to comprehensive coverage.
Calling all customers
Sky's overall subscriber numbers have dropped from 856,000 in 2014 to 750,000 in 2018. The company's financial report released in February indicated that the subscriber losses were being stemmed to some degree – with 28,000 departing as opposed to 40,000 a year earlier – but Sky still has work to do in terms of convincing consumers that there's enough on offer to keep their dish connected from one month to the next.
There's a dual challenge in this for Bayliss. On the one hand, he'll have to go out into the marketplace to attract new customers – many of whom may have left the service – but he'll have to do this in a way that doesn't make existing customers feel that they're getting a raw deal in return for their loyalty. Whether it involves a major telco or a subscription TV service, nothing annoys an existing customer quite as much as seeing discount deals being offered to newbies. Which is to say Bayliss probably won't be relying quite as heavily on the rampant price slashing common in the grocery aisles where he previously plied his trade.
It's just too expensive
One of the major reasons for customer churn is because of the perceived expense of subscribing to Sky in comparison with cheaper alternatives like Netflix, Lightbox or Amazon Prime.
But the growth in competition could also be a blessing in disguise for Sky. As more players enter the market, New Zealanders are being forced to fork out money for numerous subscriptions to get a full suite of the content they want. A single subscription might seem cheap on the surface, but the costs can quickly pile up as you add a second, third or fourth subscription to get everything you want.
The great unbundling of entertainment has already seen the best shows split across services and this is only set to increase as Apple, Disney, Netflix, Amazon and the other tech giants ramp up the battle for supremacy in this space.
In the last year, Sky has responded to expense concerns by revamping its pricing structure and offering customers greater flexibility to pick and choose what they like. Among the changes, Sky stripped back its basic starter package, offering it for $26 per month. Subscribers were then able to tag on Sky Entertainment for $25.50 or a sports package for an additional $32.
As unbundling continues to rip entertainment and sport into increasingly niche fragments that each demand a subscription fee, Sky will have a compelling story to tell in the fact that viewers can still gain access to a wide spread of sport and entertainment without having to jump between numerous services.
Tech woes
Sky's reputation as a reliable sports provider has been hampered in recent years by continued problems with its streaming app, Fanpass. The issues are so common that it has become something of a national pastime to trash the app on social media, and even new boss Stewart recently admitted that it wasn't a great service.
Subscribers have been promised improvements, and the onus will rest on the marketing team to convince Kiwis that they're good enough to justify the purchase. This will be particularly important as pressure grows on Spark to deliver a glitch-free World Cup at a time when it's struggling with the odd mishap in streaming Formula 1.
With the focus on Spark, Sky has the time to tweak its service and get it to a level that Stewart believes is appropriate for a world-class sports provider. The importance of getting this right has greater ramifications than stopping the haters on Facebook. It will give Sky a significant bargaining chip when it comes to convincing content providers that it offers the most reliable online service in New Zealand.
Content owners - particularly those in the live sports spaces - are wary of Optus-sized risks and would be more willing to award online rights to Sky if it could guarantee a free-flowing stream every time.
Investor angst
The stock market remains one of the best indicators of business optimism. If investors believe a business has a bright future, then they'll be happy to pump money into it for long-term gains. This part of the reason why heavily indebted companies, like Netflix, continue to perform well on the market.
Over the last few years, the predominant narrative circling Sky has been one of decline, pulling the company's stock price down from around $6.90 in 2014 to $1.24 this year. Investors are battling to see a survival strategy for Sky, a way for the business to continue pushing against the growing weight of international competition.
If the refreshed executive team can find a way to shift this narrative and better communicate where Sky is going, then maybe – just maybe – investors could again see something worth believing in.
