He's still Sky high

STEVE KILGALLON
Last updated 05:00 04/09/2011
skywide
MICHAEL BRADLEY

Happy place: The average tenure of Sky TV chief executive John Fellet's top managers is 17 years.

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He is not your usual chief executive, Steve Kilgallon discovers. And, if not for the goldfish, he would not even be in television.

They cost John Fellet a "buck ninety five" and they changed his life. Two goldfish in a plastic bag, planted in a water-cooler in the Arizona office of audit giants Arthur Andersen in a prank that cost him his year-old career as an accountant, leading instead to a career-long love of television.

When Fellet was called in by his manager at Andersens after the goldfish stunt, "he pushed a piece of paper across his desk and said `I suggest you call them [an Arizona pay-TV network] today'. Iwas fired into pay TV and it was the best thing that ever happened".

Three decades later, in 2001, he became chief executive of New Zealand's Sky TV in the same week Enron unravelled and Arthur Andersen, as their auditors, crumbled, financially ruining all their partners. "I thought how the Lord was looking out for me," says Fellet drily.

He was never meant to be an accountant; he turned to it when he realised he wouldn't be a professional baseballer. "I realised within three weeks I had made a terrible career choice," he says. "I hated it." But ever since he has been in pay television, and since 1991, at Sky, which he's seen grow from 120 employees to over 1000 and into one of New Zealand's biggest companies.

He claims he couldn't do anything else, but then admits he probably could, but wouldn't want to. "I am a pay TV savant," he says. "I would be the guy with a squeegee cleaning your windshield at the intersection. Pay TV and baseball are the only things I know anything about."

Sky's 2008 annual report recorded Fellet's salary at $1.1 million (although he's done well from stock options), and a story in the Independent the next year postulated "he must be annoyed that he has become part of the furniture ... if he was to be head-hunted these days from the US cable industry from whence he came, his salary would have a two in front of it". Actually, Fellet says he's had plenty of chances to go, and while he suspects if he worked elsewhere, he would earn more, he asks: "Would you be any happier? I don't think I would."

Fellet says he has no formal contract, having seen the difficulties his predecessor Nate Smith's "iron-clad" deal caused when he fell out with his board, and instead has an agreement which gives him a year's notice to "find someone dumb enough to hire me... and go someplace else, because there is not a lot of pay TV companies here".

That longevity is matched by the tenure of his lieutenants, and the long-term approach of a company which has grown steadily, last month reporting a $120m annual profit and 3.4% increase in subscribers; they focus relentlessly on adding subscribers and reducing "churn" (the industry term for those who disconnect their dish). He says the average employment of his senior managers is 17 years; of his four top executives, two were salesmen, one was in customer services and another a television installer when he arrived. "Loyalty means a lot to me," he offers. "I am convinced these guys get a little bit better every day. In certain organisations, you might rust, but we constantly have new challenges and are innovating. It's still fun and exciting figuring out how to do this."

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FELLET DOESN'T seem the typical chief executive. When we meet, he comes to collect me himself from Sky's reception desk. Then he leads me on a long walk to a semi-converted warehouse on the edge of the company's sprawling Mt Wellington, Auckland, compound, where he has exiled himself because overseas networks have hired the main building for the Rugby World Cup and there were no volunteers to relinquish their offices. His new digs are bare, with views of a carpark and a skip, the only adornment his baseball trophies. There's no wall of flashing television monitors, just one switched-off flat screen, where stood, until he went on holiday, an ancient big-screen "as deep as it was wide" that disappeared while he was away.

He's self-deprecating, unflappable, wryly funny – and if there's any way to say this without sounding racist, rather unlike your typical American. But then he's virtually a local now. "I wouldn't go back if I got fired tomorrow," he says. "I would stay, and coach baseball. I am not an anti-American, this is just a fantastic place to live, and all my friends are here now. Anyway, I left before the internet was invented, so I've lost track of everybody."

So he genuinely did want to be a baseball player – all that stopped him, he says, was "talent". He won a baseball scholarship to university, where he took his accountancy degree and also did some stand-up comedy, and from an initial 150 trialists, made the last 28 for 25 spots on the roster of the championship-winning University of Arizona team, whose coach instead steered him into high-school coaching. He still coaches, with his club side reaching the last four national finals, winning two. He's also coached the New Zealand national team and is a Baseball New Zealand director.

His unfortunate stint at Arthur Andersen came after graduation, before the American network he then worked for elevated him to a roving role fixing up issues at different stations and moving on. Assigned here as chief operating officer a year after Sky's launch as a three-channel proposition, he began with a similar brief.

That he's still in New Zealand appears testament to his success; so too the suggestion that 40% shareholders News Limited (Sky's chairman, Peter Macourt, is a News exec) give him free licence. "For all the stories I've heard about Rupert Murdoch being a megalomaniac and reading every editorial ... I've met him only once and never had the phone call saying `what the hell are you doing?"' In fact, says Fellet, he saw a map in News Corp's HQ showing all its holdings and New Zealand was entirely absent.

It's said he's a tough negotiator. He laughs and says his deals don't work unless they are mutually beneficial, and anyway, he's always losing out to the main networks (he says TV3 beat him to the V8s and TV1 to the America's Cup). With about 2000 different rights deals, he hasn't time to muck around: "If it is worth $10, I don't say can I get it at $2, I say it's worth $10. If someone else can offer them $11, then I say good luck, someone is either dumber or smarter than me."

He reckons his core skill may be that valuation of TV rights, juggling not only how many will watch, but how many would connect or disconnect as a result. He's certainly deeply involved in the sports deals that Sky's growth was founded upon, although he says sport is not as significant a sales driver as it once was.

Under Fellet's watch, Sky has certainly reshaped the sporting landscape, nudging netball and rugby into producing more television-friendly products and leading the trend towards evening sports to suit his scheduling.

Sky's growing dominance of televised sport has been aided by government's failure to enact anti-siphoning legislation to preserve key events solely for free-to-air television. This leniency is often credited to the lobbying and influence of Fellet and his chief fixer, Tony O'Brien, one of that long-serving quartet. "That gets said all the time," says Fellet, "but it is terribly misleading."

He argues only a handful of countries have such laws, and they apply only to some events. Anyway, the free-to-air networks have neglected sport, and are too constrained to offer the depth of coverage he can. And there is, he says, always one rugby game a week on Prime, the network he paid $30m for, and doesn't demur too heartily when it's suggested he owns it as a defence to head off complaints about his sporting monopoly. Prime, he says, has another purpose: "It's a good advertisement: I couldn't buy that much airtime to promote rugby on free to air."

Given he has the free-to-air network he wants, while Fellet is aware of rumours of a Sky bid for TV3 owner Mediaworks, and won't comment, it's thought he's not interested. Sky now has 51% market penetration, yet Fellet suggests the pay-TV sector could match US levels of 95%, but may become increasingly fragmented.

He sees a market for a "cheaper version" of Sky, and subscription video-on-demand, delivered first through PCs, then through net-enabled televisions. Sky has also relaunched its internet TV service, iSky, a "failure" two years ago because of now-resolved ISP issues, and he says: "You can sit there and let the internet be a threat, or look at it as an opportunity. We did that with satellite, and made a success of it. We can do it with the internet."

Throughout the conversation, the TV in the corner has stayed mute, but Fellet claims to watch "way too much". His first action when he travels overseas is to switch on the hotel television and channel-surf; he bores his grown-up children with dinner-table talk of psychographics and audience skews and tracks trends by watching the 20 top-rated shows.

"It's easy to get disconnected," he explains. "I know what I like, but if it was up to me, all we would have is baseball and John Wayne movies and we'd have about five subscribers.

"So I have to figure out what an 18-year-old male would want, and what a 75-year-old female would watch. So I end up watching a lot of shows I would otherwise not. Sometimes I like them."

- © Fairfax NZ News

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