The new results from Sky show that 28% of Sky customers now have Sky+ - thats 2.374 million households - up from 2 million in January. Anyone who has a Sky+ knows that the TV experience is transformed with one of these PVRs - and we're now seeing PVRs for Freeview and from most electronics brands.
Given Sky have defined this sector in the UK, after initially marketing Tivo, we believe they see Sky+ as a major competitive advantage - especially as churn amongst Sky+ users is significantly lower than the rest of the Sky Customer base.
So the decision to buy Amstrad ( who supply around 30% of Sky's set top boxes)is probably behind the need to make Sky+ the clear leader in PVRs . By having a design and development team inhouse Sky can pioneer new uses and applications for set top boxes - including offering real VOD through a broadband connection rather than just through the satellite as previously announced. With over 700k broadband customers Sky can develop hardware that maximise the synergies between (Satellite) TV and the web - defining the sector before new players like Apple and PlayStation emerge as real competitors.
Of course another advantage of owning more of the supply chain is that the cost to Sky of new Sky+ boxes will be cheaper - so we still expect Sky to start giving them away sometime soon. With the marketing costs increasing to fight off Virgin and the levels of churn, we believe that it would probably be cost effective.