Sky TV hooks up with Disney to lure broadband customers

Sky is offering a year's free Disney+ access to anyone who signs up for at least 12 months to its new broadband service.

Following a recent price rise, the Disney+ streaming service costs $12.99 per month or $129.99 (a 15 per cent saving) if you pay for a year up-front.

Sky Broadband offers an unlimited data 900Mbit/s UFB fibre plan for a very competitive (for that speed) $79 per month.

The Disney+ offer will be available to any eligible customer who signs up to Sky Broadband before May 31, 2022, and is a new or returning Disney+ subscriber.

All customers that have previously signed up to Sky Broadband will also be offered 12 months of free Disney+. That should get Sky some goodwill. 2degrees snubbed existing customers when it introduced a similar 12-month promotion involving Amazon's $8.99 per month Prime Video.

The Disney+ deal is also exclusive to Sky Broadband; a contrast to Netflix that has run numerous promos with major ISPs.

The deal also marks another shift in the relationship between Sky and Disney+.

In late 2019, as it launched its new global streaming service, Disney pulled its channels from Sky TV and other pay-TV operators around the globe.

But lately, they've been getting closer again with Sky customers getting access to the ESPN+ streaming service (ESPN is 80 per cent owned by Disney, 20 per cent by Hearst Communications); content from Disney-owned Hulu now appearing on Sky's Neon following Sky's purchase of Spark's Lightbox) and the new Disney+ promo.

Direct-to-consumer apps - which cut out both old-school middlemen like Sky and new-school aggregators like Netflix - have been around for a while but have really taken off over the past 18 months, and accelerated during 2020.

Disney has seen all of its big three streaming services, Disney+, Hulu and ESPN+, pile on to hit a collective 142m subscribers worldwide and US$3.5 billion revenue by early this year.

The runaway success of Disney+ has sparked a wave of direct-to-consumer imitators, including Discovery+, HBO Max and Paramount+.

But like Netflix, Disney+ has seen its streaming growth slow in its latest quarter as Covid restrictions ease in many countries.

Yet global streaming services are now far and away larger than any traditional broadcaster - and they're still getting bigger.

Disney+ series The Mandalorian. Photo / Disney.

Disney+ added "only" 8.7 million new subscribers during the March quarter for a new total of 103.6m subs worldwide (analysts had been expecting 110m).

Elsewhere in the Disney empire, Hulu had 42m subscribers at the end of the March quarter, and ESPN+ 14m subs. While Hulu grew by a third over the past year and ESPN+ by 75 per cent, they also saw growth in the three months to March 31.

Despite the levelling-off in growth, Disney says Disney+ is on track to reach between 230m and 260m subscribers by 2024.

For contrast, Netflix recently reported 208m subscribers.

Amazon has 204m subscribers to its Prime service, which includes goods delivery, audio and video, but doesn't break out video streaming numbers on a regular basis.

Last month, Amazon said it would buy MGM Studios for US$9b ($12.5b) in a move that will boost content on its Prime Video service. Prime will also stream Amazon's billion-dollar Lord of the Rings series, currently being shot around West Auckland, and Amazon recently green-lit seven Prime original series that will be shot across the Tasman.

Why Sky Broadband?

Some analysts have questioned whether there's any point in Sky entering the crowded, low-margin broadband market. Others have seen potential for the new service to be used as a lever to keep customers loyal, or help attract new ones. Sky's first broadband offer certainly leans strongly in the reduce-churn direction. Your $79 broadband bill jumps to $109 per month if you drop Sky Starter.

Another argument goes that the more services you have with one provider, the more hassle it becomes to defect to a competitor - hence the craze for power companies to bundle broadband. The advent of UFB fibre - whose simpler infrastructure means it's much easier for a customer to be shifted between retail internet providers - has underpinned the fad.

Former Sky TV chief executive Martin Stewart favoured a major telecommunications play, with his company dealing directly with Chorus. He also said a Sky mobile phone service was "only a matter of time".

Under new CEO Sophie Moloney, the mobile ambition has been quietly shelved, and Vocus (owner of Orcon, Slingshot and Flip) has been brought in as a middle man - lowering costs and risk, if also eating into margin.

Vocus operated the first iteration of the broadband service known as Stuff Fibre (later run by Vibe) when it first went live in 2016. Stuff Fibre garnered a modest 20,000 customers before being sold to Vocus in 2020.

Sky refused to comment on the number of Sky Broadband subscribers so far.

The company's shares closed yesterday at 16.9c. The stock is down 8.65 per cent for the year.