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  Reply # 2216059 12-Apr-2019 21:21
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shk292:

 

tdgeek:

 

Definition  - a proportionate saving in costs gained by an increased level of production.

 

If an Oz SVOD player buys F1 rights, it will cost more than what Sky or Spark will pay, but per head of population its a lower cost. More heads to divide the cost by. So if rights you buy for sport or movies is a lower cost per head, you can charge lower cost per head to the public. Another example is buying in bulk. If your business is big, you get a better deal, you have a better economy of scale. Your larger scale (size) gets a better economical return (cheaper price)

 

Happens all the time in NZ. I've been to many cities that are much bigger than our whole NZ population.

 

 

 

 

Oh sorry, I didn't realise that every person who watches F1 actually has their own copy hand-crafted before being streamed over an individual connection /sarc.  I understand how economy of scale works, but I don't see that it is relevant in this case.  Why isn't Spotify more expensive here or cheaper in UK?  Or Netflix?

 

There is no logical reason whatever why f1 rights, or any rights should cost more per head for a 4M population country than a 60M country.  This just seems an artificial argument for why Kayo sports etc is cheaper than Sky or Sport.

 

My personal view is that the cross-subsidising of Sky Sport from Sky basic, and the monopoly position that Sky enjoyed as a PPV provider, are what have driven our costs up.  We now see that this model doesn't work when competition kicks in, shown by the sudden drop in fanpass costs and the splitting of the various Sky packages.

 

 

I dont really want to revisit the same old aruiments over the years. If you dont feel its normal for a VERY small country to not have as good a deal as a 60M population, there is little point in discussing it. Had Sky been raking in extreme cash over the years, then your points may be valid, but thats never been the case. 

 

Cross subsiding Sport from Basic has nothing to dow both costs going up. Thats merely playing with the numbers, so Sport costs $29 per month once you add it to Basic. It is not relevant to the costs of running the business. Unaware of Sky being a monopoly, or how a monopoly causes costs to increase. It can cause selling prices to increase though, but as per Skys financial results, there have never been any paddocks of cash they had to out somewhere. 

 

Competition? Like NF? They dont compare so they dont compete, but the fact is people now see $15 per month as the standard price. Ask Netflix to buy Sky Sport and ask what they would charge. It will be the same, as they will have the same costs. (Less satellite, which is actually not a huge cost)

 

As Sky costs more than $15 its a ripoff apparently.


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  Reply # 2216062 12-Apr-2019 21:28
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I disagree

As a business they should be looking at getting less money from lots of people rather than alot of money from very few people.

That's where the real economies of scale come in.




Voice gives context

 
 
 
 


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  Reply # 2216267 13-Apr-2019 08:00
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sdavisnz: I disagree

As a business they should be looking at getting less money from lots of people rather than alot of money from very few people.

That's where the real economies of scale come in.

 

They already get less money from a lot of people, read the financial results, they are public. 


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  Reply # 2216307 13-Apr-2019 08:28
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Truth is, Fanpass in its current format is a hobbled service that is poor value even with the current price drop. For me to come back as a customer it would need:

 

  • to be competitively priced against Kayo, without imposing minimum term contracts
  • 1080p
  • Full compliment of SKY sport services including the sport that gets pushed to the pop-up channels
  • Proper SVOD including full replays available shortly after the live event airs

Tick those boxes and I'll drop Kayo and come back to Fanpass.


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  Reply # 2216432 13-Apr-2019 12:36
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shk292:

 

tdgeek:

 

Definition  - a proportionate saving in costs gained by an increased level of production.

 

If an Oz SVOD player buys F1 rights, it will cost more than what Sky or Spark will pay, but per head of population its a lower cost. More heads to divide the cost by. So if rights you buy for sport or movies is a lower cost per head, you can charge lower cost per head to the public. Another example is buying in bulk. If your business is big, you get a better deal, you have a better economy of scale. Your larger scale (size) gets a better economical return (cheaper price)

 

Happens all the time in NZ. I've been to many cities that are much bigger than our whole NZ population.

 

 

Oh sorry, I didn't realise that every person who watches F1 actually has their own copy hand-crafted before being streamed over an individual connection /sarc.  I understand how economy of scale works, but I don't see that it is relevant in this case.  Why isn't Spotify more expensive here or cheaper in UK?  Or Netflix?

 

There is no logical reason whatever why f1 rights, or any rights should cost more per head for a 4M population country than a 60M country.  This just seems an artificial argument for why Kayo sports etc is cheaper than Sky or Sport.

 

My personal view is that the cross-subsidising of Sky Sport from Sky basic, and the monopoly position that Sky enjoyed as a PPV provider, are what have driven our costs up.  We now see that this model doesn't work when competition kicks in, shown by the sudden drop in fanpass costs and the splitting of the various Sky packages.

 

 

Correct - there is no logical reason why sports rights are different in each country.  Population is a spurious input in this argument.  Cost per head is meaningless unless you're talking a global event like the Olympics but even then there is no rhyme or reason to a countries pricing.  It all comes down to addressable or interested population - and the number of interested parties at the time of rights negotiations. 

 

Take the EPL when Optus acquired the 2013-2016 rights.  Population of Austraian hadnt changed but Optus was willing to pay almost 3x the previous Foxtel price.  NZ's price barely changed - in NZ the rights value per person is a fraction of the Australian.  So what?  Its meaningless.

 

More important is the number of viewers (or potential viewers).  If the F1 rights in NZ are sold for $1m does that mean $5m in Australia - or more or less?  The key is the number of F1 fans.  If NZ only has 10,000 fans willing to pay for F1 then the cost per viewer is $100/yr.  Flip side - rugby.  The cost of SANZAR rugby rights in NZ probably dwarfs Australia - cos fewer people in Australia wants to watch it compared to NZ.  The cost of SANZAR rights in Asia is probably a pittance.  All the rugby rights that Rugbypass has for a vast population of Asia - a pittance.  Interested viewers in the countries Rugbypass covers - apparently more than 20,000 cos it broke even recently on 20,000 subscribers.  More important is the rights cost per viewer in Asia.  

 

Economies of scale in content rights - only true if the buyer can keep costs per viewer low so its not any economy of scale.  The economies of scale come from platform, delivery, billing, overheads etc.  

 

 

 

[If you think that Sky had a "monopoly position" (which is just a wrong wrong wrong definition here - read some ComCom reports.  At best you should be using dominant position as the definition) then it should have been able to drive down content costs per viewer, enjoy supernormal profits and have been creaming it.  No evidence of that - and the evidence has been that bidding for sports rights has been (and continues to be) a competitive process.  In fact there have been episodes where buyers have been unwilling to pay the price that the sellers want for their rights and the content has not been shown.  In other cases other bidders have won the rights - thats not what you get in a monopoly situation.  ]


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  Reply # 2216445 13-Apr-2019 12:47
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shk292:

 

tdgeek:

 

Economies of Scale. UK would pay less per person to buy rights than we would. 

 

 

Doesn't make sense.  There's no scale involved.  We don't pay more for Netflix or Spotify (as far as I'm aware - I actually pay my Netflix subs in UK and I think it's marginally more expensive).

 

 

Just playing devils advocate - do you think Netflix prices in NZ should be higher than the US (small market, less economies of scale), lower than the US (no overheads) or the same?

 

BTW, I dont think Netflix prices are set like that.  I think its what the market will bear, place on the adoption curve etc.


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  Reply # 2216447 13-Apr-2019 12:49
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ockel:

 

Correct - there is no logical reason why sports rights are different in each country.  Population is a spurious input in this argument.  Cost per head is meaningless unless you're talking a global event like the Olympics but even then there is no rhyme or reason to a countries pricing.  It all comes down to addressable or interested population - and the number of interested parties at the time of rights negotiations. 

 

Take the EPL when Optus acquired the 2013-2016 rights.  Population of Austraian hadnt changed but Optus was willing to pay almost 3x the previous Foxtel price.  NZ's price barely changed - in NZ the rights value per person is a fraction of the Australian.  So what?  Its meaningless.

 

More important is the number of viewers (or potential viewers).  If the F1 rights in NZ are sold for $1m does that mean $5m in Australia - or more or less?  The key is the number of F1 fans.  If NZ only has 10,000 fans willing to pay for F1 then the cost per viewer is $100/yr.  Flip side - rugby.  The cost of SANZAR rugby rights in NZ probably dwarfs Australia - cos fewer people in Australia wants to watch it compared to NZ.  The cost of SANZAR rights in Asia is probably a pittance.  All the rugby rights that Rugbypass has for a vast population of Asia - a pittance.  Interested viewers in the countries Rugbypass covers - apparently more than 20,000 cos it broke even recently on 20,000 subscribers.  More important is the rights cost per viewer in Asia.  

 

Economies of scale in content rights - only true if the buyer can keep costs per viewer low so its not any economy of scale.  The economies of scale come from platform, delivery, billing, overheads etc.  

 

 

 

 

 

 

Don't agree with that. Using Rugby is an extreme example. Same for AFL inside Australia. NZ is a smaller country so you expect the rights costs to be less. Did they match AUS on a costs per viewer? Or take Sky's sports rights divided by its subscribers, does that match AUS? If so, then there is no reason that Sky cannot be everything for KAYO's pricing. But it cannot be as the right costs are higher per subscriber. We already know that the profit Sky makes per subscriber is just a few dollars. It was $15, then $12, its probably less now. No room to move. Yes scale matters for general operating expenses, again we lose. But to suggest that as we are small it dissent matter for rights costs per subscriber.or Population, or viewer, doesn't make sense. Except for niche sports such as Rugby on NZ or Asia. and AFL in AUS compared to NZ .If that is incorrect, Sky can afford to offer ALL sport for KAYO's price. 


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  Reply # 2216462 13-Apr-2019 12:56
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ockel:

 

shk292:

 

tdgeek:

 

Economies of Scale. UK would pay less per person to buy rights than we would. 

 

 

Doesn't make sense.  There's no scale involved.  We don't pay more for Netflix or Spotify (as far as I'm aware - I actually pay my Netflix subs in UK and I think it's marginally more expensive).

 

 

Just playing devils advocate - do you think Netflix prices in NZ should be higher than the US (small market, less economies of scale), lower than the US (no overheads) or the same?

 

BTW, I dont think Netflix prices are set like that.  I think its what the market will bear, place on the adoption curve etc.

 

 

Netflix is different. Its overheads are consumed in the US, with no doubt some small overhead if any, in other countries. Maybe someone sits in a wardrobe watching the CDN operate in each country, thats pretty much it. 


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  Reply # 2216466 13-Apr-2019 13:08
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tdgeek:

 

 

 

Don't agree with that. Using Rugby is an extreme example. Same for AFL inside Australia. NZ is a smaller country so you expect the rights costs to be less. Did they match AUS on a costs per viewer? Or take Sky's sports rights divided by its subscribers, does that match AUS? If so, then there is no reason that Sky cannot be everything for KAYO's pricing. But it cannot be as the right costs are higher per subscriber. We already know that the profit Sky makes per subscriber is just a few dollars. It was $15, then $12, its probably less now. No room to move. Yes scale matters for general operating expenses, again we lose. But to suggest that as we are small it dissent matter for rights costs per subscriber.or Population, or viewer, doesn't make sense. Except for niche sports such as Rugby on NZ or Asia. and AFL in AUS compared to NZ .If that is incorrect, Sky can afford to offer ALL sport for KAYO's price. 

 

 

I'm not even sure that Foxtel can afford all sport for Kayo's pricing.  As time develops we'll see whether Kayo will contribute to Foxtel's profitablity or detract from it.  Its employing the same philosophy than many have used before - low pricing to get FMA.  Is Kayo profitable at $25/mth?  

 

I think you've missed the most important point.  Its all about cost-per-viewer (and cost per viewing hour).  If the revenue per viewer is greater than the cost-per-viewer then the rights are profitable.  Are there 14x more viewers of EPL in Australia than NZ?  Was Optus less profitable when it won the rights or was NZ wildly profitable (recall that PLP didnt renew is NZ bid for the rights - it went to BeIN, reportedly at the same value).

 

The only people that know are those within the businesses as no one discloses rights costs and no one discloses viewership information.  We're all just wildly speculating about costs, business models, profitability - arguing about comparative pricing and profitability is just going to end in ongoing circular arguments and more speculation.


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  Reply # 2216467 13-Apr-2019 13:09
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tdgeek:

 

ockel:

 

shk292:

 

tdgeek:

 

Economies of Scale. UK would pay less per person to buy rights than we would. 

 

 

Doesn't make sense.  There's no scale involved.  We don't pay more for Netflix or Spotify (as far as I'm aware - I actually pay my Netflix subs in UK and I think it's marginally more expensive).

 

 

Just playing devils advocate - do you think Netflix prices in NZ should be higher than the US (small market, less economies of scale), lower than the US (no overheads) or the same?

 

BTW, I dont think Netflix prices are set like that.  I think its what the market will bear, place on the adoption curve etc.

 

 

Netflix is different. Its overheads are consumed in the US, with no doubt some small overhead if any, in other countries. Maybe someone sits in a wardrobe watching the CDN operate in each country, thats pretty much it. 

 

 

So the price for a standard Netflix subscription is largely because the US business has to absorb all the overheads?


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  Reply # 2216587 13-Apr-2019 17:06
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ockel:

 

 

 

I think you've missed the most important point.  Its all about cost-per-viewer (and cost per viewing hour).  If the revenue per viewer is greater than the cost-per-viewer then the rights are profitable.  Are there 14x more viewers of EPL in Australia than NZ?  Was Optus less profitable when it won the rights or was NZ wildly profitable (recall that PLP didnt renew is NZ bid for the rights - it went to BeIN, reportedly at the same value).

 

The only people that know are those within the businesses as no one discloses rights costs and no one discloses viewership information.  We're all just wildly speculating about costs, business models, profitability - arguing about comparative pricing and profitability is just going to end in ongoing circular arguments and more speculation.

 

 

That is my point. In a perfect world, AUS rights would be 5X NZ rights, so both markets are bearing the same load. Sport by sport that will vary but NZ and AUS are sport watching nations, it wont be too far off. Do we pay 1/5 or 1/4??  Plus the overheads are sorted over fewer subscribers.

 

Yes, we dont know if KAYO is viable. Netflix wasn't for years, then they upped the price by a whopping $2 and the world nearly ended. We do know Skys numbers. And we know they are profitable so thats a good base. We know the profit per subscriber, the costs of sports (reported as 60% of total right costs), we know the subscriber numbers. We know Basic subsidises sport. Netflix has a miniscule profit. And it buys older cheap content, plus a small amount of its own exclusives. So the $15 standard is marginal. For sport it has to be a lot more, yet KAYO is also cheap.  


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  Reply # 2216591 13-Apr-2019 17:13
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ockel:

 

 

 

So the price for a standard Netflix subscription is largely because the US business has to absorb all the overheads?

 

 

You could say that, but in fact Netflix is a global business. Forget countries exist for a moment. It has 148 million subscribers, who cares where they are from, as NF doesn't have brick and mortar, national CEO's, assistant CEO, management team, support staff in each country. They have 148M subscribers, the minuscule management team, and a support staff to manage that subscriber base. Whether the subscribers all live in Kansas or are global doesn't matter. In NZ, NF will pay for a CDN capability, maybe there are 5 staff here, or 2, or none. The CDN is probably the only NZ based cost to bear. 


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  Reply # 2216635 13-Apr-2019 19:12
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tdgeek:

 

ockel:

 

 

 

So the price for a standard Netflix subscription is largely because the US business has to absorb all the overheads?

 

 

You could say that, but in fact Netflix is a global business. Forget countries exist for a moment. It has 148 million subscribers, who cares where they are from, as NF doesn't have brick and mortar, national CEO's, assistant CEO, management team, support staff in each country. They have 148M subscribers, the minuscule management team, and a support staff to manage that subscriber base. Whether the subscribers all live in Kansas or are global doesn't matter. In NZ, NF will pay for a CDN capability, maybe there are 5 staff here, or 2, or none. The CDN is probably the only NZ based cost to bear. 

 

 

I'm just trying to get to grips with why a Netflix US subscriber pays a 53% higher price (in NZD terms) than a Netlfix NZ subscriber.


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  Reply # 2216654 13-Apr-2019 20:02
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That conversation isn't going to end any time soon.  NZ does have high pricing for a lot of things, mostly because there are not a lot of players in the market.  The UK etc are all price moderated heavily by the likes of Amazon, where most items could be purchased cheaper online and delivered to you directly the next day.  Without a big player like that here we're at the mercy of local leaders, supermarkets, air travel etc.

 

 

 

Would be cool to see an Australasian distributor rights model, so one company could legit stream to Australian and New Zealand customers.  This old regional locked model doesn't really work now there's a viable alternative distribution system (internet vs terrestrial/satellite broadcast only).

 

 

 

Fanpass even at $40 doesn't really appeal.  I can get rugby via ESPN+ for $7.50 per month as it's not a popular sport worldwide.  Kayo is what $25 per month for all you can eat buffet, and both require the likes of dns4me to present as being based overseas.  Spark sport is $30 per month? something like that but doesn't have a lot of rights content yet, mostly F1 which isn't on Sky any more.

 

 

 

Sad story for me though is none of the sport is interesting me any more.  F1 looks like yet another snore fest of the same team winning, like the Rugby which is just overload in NZ with 3 or more competitions all fighting one another, domestic, super 25 or whatever it's up to now and then tri nations (or is it quad or five nations now) and some other all blacks tour each year etc.

 

 

 

I liked Fanpass and actually used it a bit back in the day.  Then Sky ramped it up to $99 a month or something and it all just got ridiculous.  Back to $60, or $40 if you want to lock it in is a step in the right direction, but no thanks.


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  Reply # 2216670 13-Apr-2019 21:25
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ockel:

 

tdgeek:

 

ockel:

 

 

 

So the price for a standard Netflix subscription is largely because the US business has to absorb all the overheads?

 

 

You could say that, but in fact Netflix is a global business. Forget countries exist for a moment. It has 148 million subscribers, who cares where they are from, as NF doesn't have brick and mortar, national CEO's, assistant CEO, management team, support staff in each country. They have 148M subscribers, the minuscule management team, and a support staff to manage that subscriber base. Whether the subscribers all live in Kansas or are global doesn't matter. In NZ, NF will pay for a CDN capability, maybe there are 5 staff here, or 2, or none. The CDN is probably the only NZ based cost to bear. 

 

 

I'm just trying to get to grips with why a Netflix US subscriber pays a 53% higher price (in NZD terms) than a Netlfix NZ subscriber.

 

 

How much does a US subscriber pays for Premium, 4 screens, Ultra HD? I may NZ$18-49. Do they pay NZ$28 or US$19?


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