Written by Patrice Samuels, Research Analyst

BskyB launched its new service “Now TV” last week and is now positioned to provide virtual MSO services in the U.K. The new service consists of a “Sky Movies Pass” offering that gives users access to 600 films and 11 channels for £15 and a "pay & play" option that allows access to 1000 single movie titles for 99p - £3.49 per film. The service is currently available on PCs, Macs and selected Android smartphones; it is expected to launch on iPads and iPhones next month and on Microsoft Xbox later in the year.

While several in the industry have coined this new service as a rival to Netflix and LOVEFiLM, BskyB insists that Now TV is designed to attract new customers, outside of the company’s footprint in the wake of slowing subscriber growth. The company has in fact set itself apart from Netflix and LOVEFiLM in several ways including:

• Offering 75% top 100 box office hits which they claim to have rights to offer  a year before their rivals 
• Pricing the service at a premium, above Netflix’s £5.99 and LOVEFiLM’s £4.99.
• Adding Sky channels and the pay and play option
   

BSkyB’s strategic decision to enter the market as a Virtual MSO at this point has several advantages:

• It allows the company to avoid the capital expenditure from infrastructure deployment
• They can leverage devices already in the consumer’s home.
• They can also leverage the massive promotional efforts by Netflix, which helped to acclimatize the population to OTT services.
   

The challenge going forward for BSkyB is to mitigate the risk of cannibalization of its existing pay-TV service. It is likely that current consumers will also be attracted to the flexibility offered by this service, including not being tied to contracts and being able cherry-pick content they actually want. Strategies for BSkyB will include, maintaining uniqueness between the services as well as tying their current TV package firmly into attractive the bundles with its broadband and home phone products.