Just over a year ago, various journalists across the industry had a TV dinner delivered to to their homes. In addition to providing a night off cooking for many, this unusual delivery served to announce the launch of Spark’s subscription video on-demand streaming service Lightbox.
Since then, TV dinners have been removed from the menu and Kiwi viewers have instead been feasting on the content offered by the service, clocking in 12 million hours of streaming time.
When the service first emerged from the Spark Ventures unit, Spark chief executive Simon Moutter set the target of acquiring 70,000 customers by 2015. And Lightbox chief executive Kym Niblock says that it has easily surpassed this—which isn’t all that surprising given that Lightbox previously opened up its service to all 600,000 of Spark’s broadband subscribers.
But these one-year deals will eventually expire, leading some in the industry to question whether Lightbox would be able to convert free subscribers into paying consumers once the freebies come to an end (the story of the pineapple, which went from being a decadent rarity to a fruit readily available in the supermarket, is an interesting analogy on the issue of value).
However, Niblock firmly rejects the idea that Lightbox will not be able to get Kiwis to pay for the service.
“We never underestimate what our customers will pay for, and we make sure that the money they give up is worthwhile. But I think comments like that are absolute rubbish. It’s $12.99. It’s the price of a couple of coffees. It’s the price of a movie ticket. There’s not a huge number of people in New Zealand who would look at it and say, ‘I desperately want it, but I can’t find $12.99.’ I’m not assuming for a second that the entirety of New Zealand is willing to fork that out, but at the end of the day we’re not asking you fork out $120 a month.”
Lightbox has always kept its cards close to its chest in terms of customer numbers, and Niblock again wouldn’t share any exact figures, simply saying that the service was tracking well. But it hasn’t been an easy ride. Since arriving on the market, Lightbox has seen the level of competition increasing with the arrival Neon and Netflix and the growing prominence of the on-demand services offered by MediaWorks and TVNZ—which has in turn led to some fierce content battles.
“The competition is more intense than ever and everyone is fronting up to the table for their fair share. I don’t think there are more people in the conversation,” says Niblock. “We always knew that Netflix was coming. We never expected to be alone. We’ve been at the table with Neon, TVNZ and MediaWorks for some time. It’s a pretty healthy balance for content suppliers in terms of who they might sell content to. We’re very happy that we’re getting our fair share. We don’t feel as though we’re not getting a leg in. Obviously, we’d like a lot more, but it all depends on what you’ve got to spend.”
This competition may make it more difficult for providers to secure content rights, but it has been welcomed by content providers who are now able to charge more for their shows. And while this spike in content pricing has exacerbated the ails of Quickflix in the Australasian market, Niblock says that she isn’t surprised by the rising costs.
“My colleagues in the industry might disagree with me, but my international experience tells me that what we’re seeing is the normalising of content pricing. Really, what was happening before was that New Zealand was getting a bit of riot for content. And that was good for when there were one or two providers, but now we’re seeing a normalisation of content costs. Look, they can’t keep going up, that’s for sure. And there’s certainly a point when we will all pull away from it and say, ‘That’s ridiculous’.”
She also adds that the prerogative still rests with the buyer to finalise the deal or not, and that it’s a case of deciding whether the content is worth the price.
“We all look at individual pieces of content and decide how useful they are to us in our programming profiles, and I’ve certainly stepped out of a few meetings and said, ‘I’m not paying for that, it’s not worth it for me in this market’.”
Sky chief executive John Fellet had a different opinion on the jostling for content in the SVOD market, calling it a “joint suicide pact” that all the players in the market would battle to make money out of. And he reiterated this idea in his chief executive’s letter included in Sky’s recent financial report: “Other than Netflix to date it is hard to find a business in the new media field that actually makes money. The largest company in the field, Netflix, only made US$26 million on revenues of US$1.644 billion for the quarter ended 30 June 2015.”
So does Niblock feel that she’s passing a jug of Kool-Aid around the SVOD market?
“Sounds like someone who doesn’t like having company, to me,” says Niblock.
“I think there’s a vast amount of content created out there. And whether it’s Sky or Netflix, no one can afford to buy all the content that is created every year.”
She also points out that the big-money jostling is usually restricted to a few big shows rather than a universal rule applicable to every content deal.
“There’s a general lack of understanding in some media circles of the vast amounts of content that are created across the globe. We could buy content every day until Sunday, and there would still be great TV to watch. There’s always your top two or three names that everyone is jostling for – those really big names, like Breaking Bad, Better Call Saul and Game of Thrones. But that’s only three shows. On a service like Lightbox, we carry over 7,000 hours worth of material.”
She also makes the point that SVOD services don’t have to pay for the filler content that linear TV providers need to fork out for in order to fill all the available timeslots on a day-to-day basis.
“When you’re running a scheduled programming structure, you’ve still got to fill up with something. Whereas, with Lightbox, we only have to buy material that we think the customers will watch.”
One thing that is certain is that the Kiwi appetite for online content is growing quickly. Recent research conducted by Camorra on behalf of Lightbox found that 34 percent of Kiwis stream TV shows more often (than a year ago), with 20 percent watching less scheduled TV compared to a year ago. At least 50 percent are streaming TV shows online once a week, with 25 percent streaming TV shows online more than once a week.
However, despite the growth in online viewing, the average time Kiwis spend watching TV (whether on-demand or linear) has remained stable.
“The average Kiwi watches around 20 hours of TV a week,” says Niblock.
“The total viewing hours that audiences consume doesn’t really move around all that much, if you look at the data from the last 20 to 30 years. What does change is where they watch it and how they watch it. So they’re making room for Lightbox and the services like Lightbox. We’re very happy with the time people are spending with us. We’d like people to spend more, but at the end of the day we’re very happy with the time they give us.”
This has clear parallels with the advertising market, where an increasing number of digital players are grappling for a bigger slice of a finite pie. And in much the same way that TV has been fighting to hold onto its share of ad spend, it is now also grappling to hold onto its share of the time viewers spend in front of the screen—and this doesn’t necessarily involve sitting in the living room any longer.
“You’d be amazed,” says Niblock. “We ask people all the time where they watch their Lightbox, and they tell us all sorts of things. One thing we’ve come to know is that lots of people watch their Lightbox sitting on the toilet. People are getting utility out of it, and that’s the important thing. Frankly, if your spare time is limited to sitting on the toilet, and you want to watch Outlander or Breaking Bad, then good luck to you.”