Yeah - my bad with the timing of that post.....I was a bit slow.
I believe this is actually a double play in that a) they retain customers and b) they remove costs. As unlikely as this seems, the more valuable play might be the removal of costs - here is something I can talk about from experience....
Trying to deliver content online gets *really really* expensive very fast if you aren't careful. Expensive to the point where margins are either wafer thin once everyone takes their slice (studios included) or are non-existent. Given there are a number of factors with online content all heading in the same direction (i.e. upwards) being:
- the number programmes on offer
- the duration of programmes
- the number of viewers
- the increasing quality of transmission, and
- increasing frequency of use per viewer
then the volume of data transmitted follows a geometric curve over time. Try and guess the basis on which CDN's charge? You guessed it.....data served. Sky has a few choices which are:
- Use an Australian CDN with it's inherent issues of transmission across the Tasman (would you believe their USP is they have no earthquakes!?)
- Or get real and use the largest international CDN (i.e. Akamai) with it's nodes up and down NZ, BUT the costs follow a geometric curve which eats into profit growth
- Or invest in the technology locally via investment in bandwidth and peering relationships and they eliminate a HUGE % of costs from options a and b.
The CDN's use FUD to sell their service. So if you can't buy an ISP the next best option is to set one up. This is why I say it is a smart move given I reckon this is about more than hanging onto customers. They recognise Satellite is at the sunset/cash cow stage and they want to pivot into online. It's a smart move, assuming they can execute well and do not get cold feet. The upsell is that if they do this well, then they become the local CDN for other content aggregators/resellers.
Also - another point which I have been reading about is "content creation". Again, from experience, this is also *really really* expensive and IMO won't be considered a core activity for Sky (beyond Sport). Even if they did it, it would be chump change (and likely a loss maker) compared to offering Broadband and setting up a CDN.