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Broadband

Ziggo launches Ziggo Sport - what's KPN's response?

Tuesday 3 November 2015 | 16:10 CET | Background

Ziggo is launching on 12 November its own sports channel, Ziggo Sport, which will be free for all Ziggo cable subscribers. The 24-hour HD channel will be available unecrypted for digital customers, offering the highlights of the premium channel Sport 1 and its own exclusive content. Jack van Gelder was signed up as lead presenter, as well as a number of other well-known commentators. Sport 1 will continue under the name Ziggo Sport Totaal. The new channel is an important weapon for Ziggo in its battle with KPN centred on broadband, triple- and quad-plays and (free) extra services. For Ziggo Sport, the free element is the best point, while the lack of Eredivisie and Champions League coverage is a serious miss. 

Ziggo's news opens up an opportunity again for KPN to act. The consumer may be the one to profit, if he can see the forest for the trees. If not, Ziggo may find it easier to hold on to customers and keep its leading position on the TV market. 

Important addition

This is an important step for Ziggo, CEO Baptiest Coopsmans explained to Telecompaper. First, Ziggo Sport complements the existing services, making Ziggo's triple- and quad-play offers more attractive. The CEO does not see a risk of cannibalisation for Sport 1; the premium channel will still attract the "die hard" sport lovers, for whom Ziggo Sport is not enough. Second, Ziggo Sport should attract and retain customers, helping bring them in touch with the other elements of Ziggo's offer, such as Replay TV, MyPrime, the Horizon platform and broadband services (with Docsis 3.0). And finally, Coopmans sees a social goal: Ziggo Sport, along with Ziggo's near-national network coverage, allows Dutch consumers to enjoy free national and international sporting events.

Coopmans suggested the impact on Ziggo's margin of starting a new TV channel would be limited. Ziggo Sport, which has been in preparation for a year, will cost a few tens of million, compared to Ziggo's total annual revenues of EUR 2.5 billion.

Success factors

The success of Ziggo Sport depends on a number of factors. With personalities like Jack van Gelder and plans to show major events ('el clásico' in Spanish football, the next Formula 1), the channel appears very promising. 

  • Content: broad but no top football. Ziggo Sport has an attractive range, building on the best offered on the current Sport 1 channels. Unfortunately though it lacks football for the masses, such as the Eredivisie and Champions League. Ziggo Sport will show the Dutch national team's qualification matches for the 2016 World Cup, and parent company Liberty Global has the rights through 2022 for the Olympics. KPN already has plans to work with the Eredivisie, but it's unclear still what will result from this.
  • Bundling: a nice extra. The market is moving strongly towards bundling services (triple play, quad play), and Ziggo is going along. It's not just about an attractive price, but also the extras are important, such as more mobile data, call minutes or HD channels. Ziggo Sport is an important addition for Ziggo, and a free one too. For the casual sports fan, the channel offers a wide range of content. Ziggo is likely targeting a broad audience that likes sport but isn't prepared to pay for it.
  • Positioning: increased disruption. It's not getting any simpler for consumers when it comes to content. The sports segment is mainly about live matches, which to date are found with a broadcaster. This may be free channels (NPO, RTL, SBS) or premium providers (Fox), but now another choice is added: Ziggo. YouTube is also entering the fray, offering paid access to the Spanish cup. NLziet is also expected to offer soon online access to live channels from the NPO, RTL and SBS, and KPN is starting its OTT TV service Play. The roles are changing, as Ziggo becomes a broadcaster, the broadcasters go direct to consumers, and KPN becomes an aggregator (a la Netflix). This may all lead to confusion for consumers, followed by inertia and sticking with where they're at (Ziggo, the market leader).

KPN

What does this mean for KPN? First, KPN can resell Ziggo Sport Totaal, as it already does Sport 1. The new Ziggo branding is a poke in the eye though, and something the company will not be able to get around, according to Coopmans. KPN can choose to offer this content at a discount to its customers, for example offering it 'free' to KPN Compleet customers (those taking both fixed and mobile, not necessarily quad-play). Not much can be gained with this though, and the 'free' label undermines the perceived value.

KPN has also confirmed the launch of its service Play, the positioning of which is not yet completely clear. It appears primarily aimed at broadband-only customers, or broader 'cord cutters', who want to get rid of their traditional TV subscription. This is targeting both the cable market (Ziggo customers must always take TV before adding other services, although Coopmans when asked did not rule out launching a broadband-only offer) and Netflix subscribers (who get HBO if they swap Netflix for KPN Play). The new service Play is also a possible alternative for the DTT service Digitenne run by KPN, assuming sufficient broadband is available nationwide or LTE-Broadcast is eventually deployed. In such a case, the NPO would probably take over management of the Digitenne network, which counts 400,000 TV subscribers as well as another 600,000 other users.

In short, KPN has a number of options, including doing nothing if it doesn't expect Ziggo Sport to amount to much. Second, it can develop a response based around the Eredivisie and Champions League football, which opens the door to partnering with Fox. Third, it could develop a broader response based not on sports content but using other elements of its offer, from broadband speeds and quality to customer service to KPN Play. 

Freemium

To finish, a speculative suggestion. Ziggo Sport (free with advertising) and Ziggo Sport Totaal (paid) means Ziggo is now using a freemium model. KPN could replicate this in principle by working with SBS (free) and Fox (paid). A takeover of SBS would prove more difficult though, given the stakes Liberty Global holds in ITV (10%) and Talpa (part of ITV). Talpa owns a third of SBS Netherlands.



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