Page | 1 REPORT PREPARED FOR: SKY TELEVISION NETWORK BUSINESS MODEL BY APURV TIJARE POSTGRADUATE DIPLOMA IN BUSINESS APMG 8119: DIGITAL ENTERPRISE ASSOCIATE PROFESSOR DR. ROBERT DAVIS ________________________________________________________________ Page | 2 AUTHOR CONTACTS NAME: Mobile: 022 419 2286 Email: [email protected] Student ID: 1422147 ________________________________________________________________ Page | 3 TABLE OF CONTENTS REPORT PREPARED FOR: ................................................................................. 1 AUTHOR CONTACTS .......................................................................................... 2 TABLE OF CONTENTS ........................................................................................ 3 EXECUTIVE SUMMARY ...................................................................................... 4 INTRODUCTION .................................................................................................. 5 BUSINESS BACKGROUNG ................................................................................. 5 BUSINESS MODEL .............................................................................................. 8 CUSTOMER SEGMENTS .................................................................................... 9 CHANNELS .......................................................................................................... 9 CUSTOMER RELATIONSHIP .............................................................................. 9 KEY ACTIVITIES ................................................................................................ 10 KEY RESOURCES ............................................................................................. 10 KEY PARTNERS ................................................................................................ 10 REVENUE ANALYSIS CHART ........................................................................... 11 COST ANALYSIS CHART .................................................................................. 13 VALUE CREATION ANALYSIS .......................................................................... 18 SUMMARY ......................................................................................................... 20 REFERENCES ................................................................................................... 21 ________________________________________________________________ Page | 4 EXECUTIVE SUMMARY Sky TV exists in both online and offline world, I am going to study their business model and analyse how it makes revenue, its cost analysis, how the company makes value and delivers it to different customer segments . Sky TV is mostly into broadcasting of television channels, as a result its product is an intangible object. Even though Sky has its major activities in the offline world it has recently entered into the online world with its service iSKY. It has collaborated with some of the major telecommunication services that are ISP and will provide a way for sky to deliver its TV content via internet to the customers on their phone online. This service is available to the customers using 3g service of the partnered service providers. Sky TV has come up as one of the best television service provider in Auckland; it has proved this by delivery of value and great quality of service. It has contributed in the development of media industry in Auckland and entire New Zealand. Considering the infrastructure it has the ability to reach most of the homes in New Zealand with the latest technology. We will have focus on the offline business model because iSKY is just a subsidiary product of the main Sky TV service; it just has a different channel of delivery. I will cover the business model for sky TV, it will include how the sky earners its revenue, what is the cost structure, what are the key resources and activities that are carried out to deliver value to the customers and the channel through which they are delivered. We will be studying the above points in depth. ________________________________________________________________ Page | 5 INTRODUCTION This study on sky network television in the field of broadcasting in done to demonstrate it business model. It focuses on the nine elements of the business model namely customer segment, channel, value, customer relationship, key resources, key activates, key partners and revenue creation. This is basically based on the business model canvas which is a systematic arrangement of all the nine elements and demonstrates how the each element works to make the business work. It considers the companies cost and revenue sources in the marketplace and how illustrates how Value is created. The structure of the report starts from the details of the business and the television industry in New Zealand, later we look at the overview of the Business model follows by an in-depth study of the nine elements. At the end we will summarise the report. BUSINESS BACKGROUNG Sky is one of the primary televisions broadcasting service in New Zealand. In February 2006 sky entered the free to air television entertainment sector by purchasing Prime Television New Zealand limited for nz$30 million. It provides multichannel, pay-television and free to air television services in New Zealand. Its digital satellite platform has approximately 100 channels including base package having 58 channels of news, sports, family program, general entertainment, free to air channels and radio stations, the premium channels include 6 movie and 5 sports, the rugby channel, games channels mind games, world TV, country 99tv, arts channels and a weather channel. It also provides video on demand service to MY SKY and MYSKY HDI customers, it ranges from movies, art, entertainment, sports, documentaries etc., and it is on a pay per view basis. The company also does business by sales of advertising time of 26 of its channels. The company is involved in other sectors like online DVD rental and ________________________________________________________________ Page | 6 publication of 2 monthly subscription magazines SKYWATCH and SKYSPORTS magazine. SKYWATCH comprises program guide and SKYSPORTS has sports content. Further the company provides a MYSKY a digital set top box with hard disk and recorder that gives the user the ability to record live TV. Distribution of local and international programme content to its subscriber base via digital satellite network is the principle business. In June 2013 sky was the largest pay television platform in New Zealand with over 855.9 thousand customers. It is listed on the NZX and ASX and had a market capitalisation of nz$2 billion based on the share price of nz$5.30 on 30th June 2012. Sky primary revenue is derived from the monthly subscriptions approx. 88%, installation fees and other revenue like advertising and selling program rights. INDUSTRY OVERVIEW New Zealand reached the television age quite late compared to others, Britain with its BBC started in 1936 and soon was followed by USA. Australia had is first broadcast in 1956 (ThinkTV, 2013) The New Zealand government television committee gave green signal in 1959 to this new medium after studying it for 10 years. On 1st June 1960 7.30pm the first official transmission began. The first transmission was of just 3 hours and was received only in Auckland. A year later Christchurch and wellington started getting transmission and the remaining places in New Zealand followed in successive years. (ThinkTV, 2013) TVNZ came into existence in 1980 with the merger of tv1 and tv2. The first privately owned channel came in 1989 and in 1990 Sky network television became the first pay network. This was the era of furious competition and rise of local content in televisions. Further the broadcasting act permitted over sea investor to have ownerships because of which two US firms Time Warner and TCI took control of sky TV. (Wikipedia, 2012) The 21st century saw a radical change in the broadcasting industry; sky kept adding several new channels and was reaching its subscribers via satellite. The ________________________________________________________________ Page | 7 free to air digital channels provided new opportunities to reach a wide range of audience. (Wikipedia, 2012) In June 2013 sky had captured approximately 49.4% of the pay television residential penetration. It had a market share of approximately 29.8%. Under the agreement sky digital service has the entire major free to air channels available on its satellite digital service. Sky also does reselling and retransmission for telecom and Vodafone to it 3g customers (ThinkTV, 2013). ________________________________________________________________ Page | 8 BUSINESS MODEL A business model illustrates how a business generates, delivers and creates value; it is a part of business strategy. A business model contains a large number of elements that represent the core aspects of the business. Osterwalder & Pigneur, (2013) defines business models as a blueprint that describes how organisation does business. Slywotzky, (1996 ) describes business model as the way company selects customer, defines offerings, and define tasks which it will do and those it will outsource, manage resources, create utility for customers, and capture profits and market. The business model that we have used is based on the (Osterwalder & Pigneur, 2013) business modal canvas. It is basically built on four key factors , Infrastructure - key activities key resources, partner network. Offering