Has Telecom won Vikings battle?

Telecom may have outbid Sky for the first run rights to the TV series Vikings as it tries to build exclusive content for its new online ShowmeTV service.

Sky TV chief executive John Fellet said most rights for subscription video on demand services were non-exclusive so Telecom would probably try to acquire first-run rights, although these were rare.

"A good example is one called Vikings I tried to buy for Prime. I offered a price and they said ‘we have a higher offer'. I said ‘well take it'."

Fellet said he understood neither TVNZ nor MediaWorks had bought it, so "the logical [buyer] would be Telecom, but I'm guessing."

Rights for shows such as Vikings could cost $30,000 an episode, he said.

Series one of Vikings has nine episodes, giving a potential cost of $270,000.

Most other first-run rights were already held by Sky, TVNZ or MediaWorks, said Fellet.

Telecom declined to comment specifically on its content plans, but CEO Simon Moutter said the company had started to engage with the major content studios around the world about two or three months ago.

"Having now put it out there, it means we can now talk openly and we would be delighted to talk to all sorts of partners and content owners be they local or global to explore what the possibilities are. We are open to dialogue with anyone."

Telecom's announcement on Friday of a new internet-delivered TV and movie service called ShowmeTV has led to speculation it could herald a new era of competition for TV and movie services.

One industry player, who asked not to be named, said the development "could only be good news for owners of sports content, particularly the New Zealand Rugby Union.

"Look back at 2012 in the UK when BT came into the market," he said.

In July that year Britain's dominant telco BT made a big play for live football broadcast rights, paying £738 million for three-year rights on a significant slice of premier league action.

It is not clear whether Telecom has plans to target live sport in New Zealand.

Fellet said it was possible another player could acquire online rights.

"It's something that comes up [in talks with rugby organisations]," he said. "We have a price where we get everything and we have a price where we split it up. So far they've always opted for the ‘everything' price, which is a premium."

TVNZ chief executive Kevin Kenrick, a former senior Telecom executive, said offering compelling content was key to winning viewers.

"If you look at [online TV service] Quickflix, they've been in the marketplace in New Zealand and Australia for a while now. They've got a subscription model for online content, their technology is reasonable, but their single biggest problem is that 85 per cent of the content is more than 10 years old. So you've got massively high churn and they can't build a critical mass."

TVNZ would probably be talking to Telecom about opportunities, said Kenrick.

"No doubt they will be talking to everyone and everyone will be talking to them."

They would not be in competition for online content initially, he said, because advertising funded free-to-air broadcasters such as TVNZ acquired different rights than pay-TV services.

"We've got New Zealand's market leading on demand video content offer," said Kenrick. "A big part of that is building a critical mass of viewers. You need a critical mass of viewers because otherwise you just have a whole lot of incremental costs associated with buying the content and don't have any subscribers lining up to pay for it. So you end up setting fire to a whole heap of money."

This month Sky announced Telecom had ended their deal to resell Sky services, although they were open to working together again in future.

The move was widely seen as heralding Telecom's entry into online TV on its own account although Fellet doubted it would be a significant rival. "80 per cent of UK Netflix subscribers are also BskyB suscribers," he said.

Alongside its announcement of pending TV services, Telecom reported its half-year result and said it was renaming itself Spark.

For the six months to December Telecom reported revenue of $1.85 billion and net profit of $167m.

Excluding discontinued operations the profit fell to $147m from $168m a year earlier.

While there were few details on the company's TV plans, "the intent's clear - they see structurally there's a shift in this direction and want to make a start.

"By the looks of it it'll start off as a library of general entertainment, TV series and movies, similar to what Quickflix are doing but with more content.

"They were quite clear that for a period of time at least this business is in start-up phase and unlikely to break even," said Decker. "They see it as part of the repositioning of their brand overall and happy to carry it for a period on that basis."

Sunday Star Times