Late last year, when the aroma of summer barbecues was starting to coax workers away from their desks, subscription video on-demand service Lightbox and Coliseum Sports Media (CSM) announced a joint partnership, which will see the pair of companies bring their programming portfolios together.
Dubbed Lightbox Sport, the new venture will include CSM’s full range of sporting options, which currently includes golf, English Premier League football and French Top 14 rugby.
“This partnership looks to simplify the crowded online TV marketplace,” says Lightbox chief executive Kym Niblock. “Both Lightbox and Coliseum Sports Media already give Kiwis greater choice over how they watch TV online, and both have proven the ability to secure top quality content – but together, our combined buying power will make us an even more formidable force in the market.”
This move comes on the eve of Netflix’s entry into the New Zealand market, with the streaming juggernaut set to make its service available to New Zealanders around March this year.
It’s also notable that at around the same time that Lightbox and CSM announced the merging of their services, the Herald reported that the release of Neon, Sky’s SVOD offering, had been delayed due to a technical glitch. The service was initially set to be released in December, but the Kiwi public is yet to get its first taste (it’s thought that Neon will now launch this Thursday).
As things stand at the moment, both Lightbox and CSM will continue to function as they have for sometime, but the board and management team of Lightbox and Lightbox Sport is currently working on developing different packages that will give customers control over what they subscribe to.
Since neither Netflix nor Neon will include any sports programming, the addition of the Coliseum portfolio gives Lightbox a significant point of difference over its competitors, which could be enough to persuade SVOD newbies sitting on the fence.
And in an effort to make its subsidiary even more appealing, Spark is offering 12 months’ complimentary Lightbox to all of its approximately 600,000 home broadband subscribers as well as to those who sign up (or switch) by 30 April 2015.
Although this latest perk appears to be a slightly spontaneous offering, Niblock says that it was always part of the strategy to eventually open up the service to all Spark subscribers.
"Many months of planning went into this," she says.
At first, this might seem counter-intuitive, because Spark is voluntarily writing off the $15 monthly fee that it could potentially make from all these subscribers. But at closer inspection the move starts to make sense.
“This is part of our overall Thanks programme for customers, and mirrors our added-value bundled services in the mobile space like free Spotify Premium and Spark Socialiser,” said Spark home, mobile and business chief executive Chris Quin in a release.
With each of these bundles Spark is essentially giving users added impetus to use more data. Each time it makes a service such as this available to consumers, it gives them a readily available medium on which to use more data—and this equates to a higher profit margin for the company.
And when it comes to TV shows, music and social media, the demand, particularly among millennials, is unquestionable. A recent Colmar Brunton study conducted of Kiwis aged between 16 and 29, found that 69 percent of those surveyed watching TV on-demand, 44 percent admitted to streaming shows illicitly and 43 percent said that they listened to Spotify.
Spark is effectively providing a single landscape in which users can access the content that they want—and in doing so, they are maximising their data usage.
In making these moves, Spark is evolving beyond the remit of telecommunications into a multimedia service that makes it easier for its subscribers to access desirable content.
Interestingly, this approach follows the observations made by Theodore Levitt in his classic 1960 article 'Marketing Myopia' in which he explained that the failure of railroad companies lay in the fact that executives thought they were in the railroad business when they were actually in the transportation business. This oversight meant that other players in the transportation market were eventually able to nudge the railroad players out of the market.
As Levitt explains: “The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.”
There are clear parallels with this in the Kiwi telecommunications market, which is arguably the most competitive it has ever been. But after years of price-cutting and deal matching, the players in the market now have to look for other ways in which to win customers.
The struggles in the market saw Vodafone post its first loss since 2000, finding itself $27.9 million in the red for the 12 months ended 31 March. In the period to 30 June, Spark’s revenue slipped by 3.6 percent to $3.64 billion, but it still posted a profit of $460 million. And 2degrees again made a loss of $35.9 million, although this was a 20 percent improvement on the figure posted a year earlier.
In response to the difficult market, Vodafone, which is currently undergoing a restructuring process that will see as many as 250 job cuts, 100 of which will come from the customer care department. The full details of the restructuring are yet to be announced, but Vodafone is clearly planning some major changes for 2015.
Over the last few months, the red telco has largely focused its promotional efforts on the fact that it has the nation’s biggest 4G network. But this gap is closing, and this makes its commercial partnership with Sky and the companies affiliated with its rewards programme increasingly important. In a similar move, 2degrees has also established a partnership with Google Play, which gives its subscribers access to the service.
Each of these moves hint at the fact that the infrastructure offered by the telco doesn't matter quite as much as what is on offer to the subscriber. And even though Levitt’s article was published in the Harvard Business Review over 50 years ago, it again makes an interesting observation on this point:
“… the organisation must learn to think of itself not as producing goods or services but as buying customers, as doing the things that will make people want to do business with it. And the chief executive has the inescapable responsibility for creating this environment, this viewpoint, this attitude, this aspiration. The chief executive must set the company’s style, its direction, and its goals. This means knowing precisely where he or she wants to go and making sure the whole organization is enthusiastically aware of where that is. This is a first requisite of leadership, for unless a leader knows where he is going, any road will take him there.”
Levitt encouraged business executives to question what business they’re really in. And as Spark continues to evolve and diversify its offering, it appears to be moving into a space that isn’t necessarily occupied by Vodafone and 2degrees. Whether this works in its favour is yet to be seen, but the boldness of this strategy is certainly disrupting the telco market.