The picture improves for Sky viewers

As half Sky TV's customers also now subscribe to Netflix and Spark Sport sets to launch, the Kiwi pay TV company adjusts its screens for the battle ahead.

Many Sky TV subscribers are about to get a nice surprise. The pictures on their TV screens will suddenly be a lot sharper, brighter and better than they are used to.

In his final hurrah as boss of the pay TV company, John Fellet is giving all subscribers a free “HD ticket”.

High definition television has been around for yonks but 60 percent of Sky subscribers still watch sport, movies and other SKY programming in SD – standard definition.

The difference in quality between SD and HD is significant and given that most people have HD TVs now days, it seems puzzling that the uptake of Sky’s HD service has been so low.

The reasons are two-fold - people are either ignorant of the issue or they don’t want to pay the $9.99 extra a month SKY charges for HD.

Fellet is solving both issues and buying some positive publicity at the same time.

Theoretically, it could cost Sky up to $3 million but in typical Fellet fashion he will probably get most of it back through his plan of charging more for the broadcaster's Starter, Entertainment and Sports packages.

Lifting the cost of Sport by nearly seven percent in a year when it doesn’t have rights to the Rugby World Cup seems a particularly audacious move by Sky, and it comes at the same time as Spark gives more details on the rollout of its sports offering.

Spark says it will be up and running with its internet streaming platform in early March. This has been pushed along by the date of the Australian Formula One Grand Prix on March 15, for which Spark has the rights.

The telco has done a deal with TVNZ to also carry the race, no doubt hoping to avoid any serious fallout if there are glitches or bugs in the streaming service.

Spark already has a private beta trial underway.

The company has a massive delivery challenge ahead of it with the World Cup from September.

If there are bugs or problems in the next couple of months there will be complaints, but if it happens in September there will be outrage.

Spark’s price plan is shrewd. For $19.99 a month subscribers get a package including Formula One, World Rally Champs, English Premier League, NBA basketball and hockey.

If you are interested in one sport it seems reasonable, if you are interested in more than one it seems good value.

Of course, this doesn’t include the RWC and Spark will need to think carefully about what it charges for this high demand event. It is highly likely to offer existing subscribers a discount and then try to retain them once the cup is over.

The sub-$20 pricing (a monthly Netflix premium subscription is also under $20) puts tremendous pressure on Sky. The comparison is not apples for apples as Sky offers a much greater range of content but the price point is becoming the accepted norm in the minds of many.

Sky lost 28,000 subscribers in the past 12 months (17,000 of those in the most recent half year).

Fellet says the way people now see the price-to-value relationship is probably causing the bleeding but when Sky asks people why they are dropping out they don’t get a straight answer.

“They often say it’s because they are moving (houses) but when we check with them four months later, they are still there.”

He describes the subs priced below $20 as “ a set and forget price,” and says about half of Sky's customers also have Netflix.

The problem for Sky now and certainly into the future is its huge infrastructure cost. It’s just done a new 10 year, $200 million, deal on satellite leases.

The term seems very long in a world where newer forms of technology are rapidly advancing.

Sky is also pinning its hopes on a new set-top box which will make internet streaming easier and give Sky a shot at being the preferred aggregator of content. (Its close ally, Vodafone has similar aspirations). The new box has been a long time coming and is now further delayed.

Fellet admitted yesterday the box has not performed to a “high bar” in recent trials and further work is needed.

“It is very disappointing but it is probably the hardest lesson I have learnt over the years is that if you launch a box with a bug it can be a quick route to bankruptcy.”

While Spark has no set-top box issues to worry about, its board must be slightly nervous about its foray into the content business.

It is estimated Spark is spending around $30 million a year on Lightbox and the RWC probably cost it close to $20 million for a six-week event. When you add on the cost of the NBA, EPL etc it’s clear that Spark needs to get some serious traction on the revenue side of the equation.

Spark has six months to get its delivery platform humming before the All Blacks kick off against the Springboks in Japan but internet delivery of high demand sports events continues to have hiccups around the world.

Fellet and Sky have some understanding of the issues that will confront Spark.

In what was probably his last media interview as chief executive, Fellet told Newsroom “ When we have a big All Black test match, we always have a team of people here (troubleshooting). They are not here to look after the 500,000 people watching on satellite. That’s rarely a problem. They are here in case things go wrong for the 15,000 people with Sky Go or Fan Pass watching it on the internet. The internet is a tough, hard taskmaster that will bite you in the arse at any opportunity it gets.”

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