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New Zealand's longest-running online daily news and commentary publication, now in its 23rd year. The opinion pieces presented here are not purported to be fact but reasonable effort is made to ensure accuracy.

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Smart Murdoch sells SkyTV

1 March 2013

The news broke yesterday that Rupert Murdoch is selling his holding in the NZ SkyTV venture.

Murdoch's Newscorp had held a 43 per cent stake in the pay-TV operator but looks set to divest itself entirely of any ownership.

Smart man Rupert!

Why is he so smart?

Simple -- SkyTV has pretty much reached saturation here in NZ. With over half the population already hooked up, it's unlikely that the company will see much growth in the immediate future.

Now you might think that, since the company has strong revenues and good profitability, a lack of growth shouldn't be a worry -- but I think you'd be wrong.

To date, Sky has held a powerful position in its market for two reasons...

Firstly, it had the satellite transponders and frequencies needed to deliver its content to all NZers.

Secondly, it has tied up a huge amount of content and content-options -- to the extent that other would-be competitors may find it difficult to come up with anything worth broadcasting.

However, all of this ignores the power of the Net and streamed content or video on demand.

To date, most Kiwis have been couch-potato viewers. Their comfy chair holds their inert body for the evening and they simply soak up whatever appears on the glowing screen before them. Okay, they might give the remote an occasional prod when the ads get too boring or if there's something they really want to watch on another channel -- but by and large, they're highly passive.

That however, is changing, and changing rapidly.

There are new generations of media consumers who are already used to chasing their content and for whom the act of "watching" is far more interactive than it was for their parents.

These people have already spent years "hunting down" the content they want by using tracker sites and P2P networks online.

These people don't use programme guides to see when something interesting might be scheduled to broadcast -- they use social media and IM/SMS/email to learn about "what's hot" and where to get it.

For this new generation, sitting passively in front of a SkyTV broadcast will hold little attraction. This will be the generation that turns off broadcast TV and turns on to media delivered online, on-demand and on their terms.

So while SkyTV might remain profitable for a few years yet, I suspect that it has peaked -- and therefore, what better time for Murdoch to divest himself of his shares? Great timing!

Once the UFB roll-out gets to a point where half the population can instantly access HD video content from anywhere in the world, the attractiveness and profitability of SkyTV will decline sharply. Instead of a fixed-menu, viewers will be able to switch to an a la carte feast of content, unfettered by the artificial limits imposed by TV programmers.

So, if you're holding SkyTV shares then you can continue to look forward to some regular dividend payments for a while -- but don't expect the share-price to rise or even remain at current levels. It's just not going to happen.

If you don't believe me then perhaps you'd like to buy some shares in companies that make carbon-paper, horse-shoes, CRT TV sets, slide rules and books of log tables.

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