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30 July 2020

As Sky pulls OTT from Spain, are Sky X expansion plans in doubt?

Sky was supposed to set the world alight (well, Europe) when plans were revealed in early 2017 to swap satellite TV delivery for a broadband-only video initiative. Sky’s dish-free foray began with Sky X in Austria, followed by Sky Q over FTTH in Italy, and here we are more than three years later looking at a Sky taking on the persona of its parent company Comcast – one more accustomed to dealing with customer complaints than revolutionizing technology.

In fact, Sky is going into reverse, having just shuttered its OTT video operations in Spain with the same excuse everyone else gives – failure to compete with established heavyweights, aka Netflix.

Launched in Spain in July 2017, this was a slimmed-down, 12-channel live streaming service costing €6.99 a month, so nothing like the Sky X service in Austria where a full pay TV package of some 270 channels is delivered purely over broadband with no satellite support.

Don’t get us wrong, Sky has proven itself a trailblazer among operators in terms of in-house technology, and as a company with a keen eye for investing in emerging trends. However, since the takeover by Comcast, the title of most disruptive video operator in Europe probably goes to Vodafone today.

But if Sky is struggling to compete with a basic, low-end package in the burgeoning market of OTT video in Europe, then how does it expect to compete in a market that is actively shrinking? You could argue that SVoD is a massively more saturated market compared to traditional pay TV, and so Sky’s exit from the Spanish streaming market will allow the company to focus on pay TV, where its expertise lies. We would be inclined to agree if there were any signs of Sky X breaking out of Austria. Similarly, very little has been said about how the ongoing trials of broadband-only pay TV in Austria and Italy have been progressing. Are they even trials anymore? Or has Sky settled on Austria and Italy, hoping that larger markets will forget it ever promised to expand?

Clearly there is a conflict of interests here. Sky’s standalone video streaming service Now TV has been making waves in the UK, particularly during and post-lockdown with the return of live sports. However, we think Sky is unlikely to announce a broadband-only offering in the UK and Germany until it knows its network infrastructure is capable of delivering UHD content at scale.

The whole point of going broadband-only is that it opens Sky’s premium TV packages up to a huge new potential customer base – residents who have never even had the option to get Sky TV due to restrictions on installing garish satellite dishes on buildings. This could be due to living in a listed building, or a personal preference of private landlords. In densely-populated major cities across Europe, dish-less communities are commonplace.

So, Sky Q remains the operator’s prodigal son in the UK, without even a hint that Sky X could be coming to any key markets like the UK and Germany. Sky Q is a hybrid set top so still requires a satellite dish to receive programming. A few weeks back, Sky Q was given a facelift with a new expanded view UI, intuitive smart buttons, improved discovery and something called sports centers. This was a clever little update, chopping and changing subtle parts of the UI to show a whole one third more content when browsing.

Sky X comes in three package flavors, with options of €19.99 a month for select channels and €34.99 a month for the full package. One of the standout surreal parts of Sky X’s arrival was the decision to charge €7.99 a month for a tier comprised only of free-to-air channels – clearly viewing IP-delivery via an app rather than a set top as a privilege worthy of a subscription cost.