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Sky Television customers will be able to watch programmes and movies over the internet at any time when it launches video on demand later this year.
The broadcaster said it would launch a subscription video-on-demand (SVOD) service, separate to its broadcast pay-television service, by the end of the year.
Subscribers will be able to watch television shows and movies over the internet at the time of their choosing, in the same way they can watch YouTube videos. Sky's service will also compete with rivals Quickflix, Ezyflix and United States-based Netflix.
The move is designed to capture the hearts and wallets of a younger generation who have eschewed forking out for pay-television in favour of downloading programmes, legally or illegally, over the internet.
Chief executive John Fellet indicated the service was likely be priced similarly to other SVOD entertainment services, which generally cost about $10 to $20 a month.
"It wouldn't make sense to enter at a different price point unless it was radically different in content," he said. But it will be free to households that subscribe to Sky's broadcast pay-television service.
Victoria University broadcasting lecturer Peter Thompson said Sky's entry into subscription video-on-demand television may help entrench its dominant position in the pay-television market.
By making an announcement now, Sky appeared to be trying to pre-empt Telecom's launch of an SVOD service in a month or two, Thompson said.
"Sky has the advantage that providing the service cost-free to its incumbent customers sews up a substantial part of the market that might otherwise be willing to look at other services, such as Telecom's," he said.
A Commerce Commission spokesman said no concerns had been raised with the regulator. "It looks like competition."
Between 20,000 and 30,000 New Zealanders subscribe to Netflix even though that is against Netflix' terms-of-service, according to Canadian technology company UnoTelly which offers a service that lets internet users bypass Netflix' country-block.
Sky has acknowledged there is a group of mostly young, tech-savvy people that it does not cater for effectively with its broadcast service. About half of homes subscribe to Sky, and Fellet said SVOD could help it serve closer to 75 per cent of the market.
Television and movie studios sell subscription video-on-demand rights separately to broadcasting rights, meaning Sky will need to negotiate fresh deals with programme-makers for its SVOD programming.
Fellet said Sky was about halfway through that process. Sky spokeswoman Kirsty Way said sport would not be part of the service.