Sky Television has slashed its entry price, as chief executive John Fellet conceded it was facing a "Hobson's choice".

The pay-television firm is breaking its "Sky Basic" service into two, giving new and existing customers the option of building bundles on top of a cheaper entry-level package called Sky Starter that will cost $24.91 a month.

Extra channels currently included in Sky Basic will cost $25 a month, so there will be no change in the current price of $49.91 a month if customers want to keep all the channels currently offered with Sky Basic.

DAVID WHITE/STUFF Sky TV chief executive John Fellet hopes the company can keep its "traditional" customers happy while appealing to new ones.

But the new option means customers can get a bundle including Sky Sports for $54.81 a month, instead of the current minimum of $79.81, by ditching some news and entertainment channels have previously been compulsory in any Sky package.

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The price change is a long-awaited response from Sky to complaints it has offered poor value in an increasingly competitive television market, which has been changed by the arrival in New Zealand of internet television services such as Netflix, Lightbox and Amazon Prime Video.

SUPPLIED Sky Starter includes 46 channels.

It follows an exodus of almost 34,000 satellite subscribers in the year to June.

Sky hoped the change would attract new customers.

But its shares tumbled almost 10 per cent after investors fretted about the impact it could have on its future earnings, knocking $100 million off its market value.

SCOTT/HAMMOND/STUFF Sky's control over key sports broadcast rights remains secure for another few years.

Currently all customers buy a Sky Basic package for $49.91 and then add options of Sport, Movies and other premium channels.

Under the new pricing plan which takes effect on Thursday, Sky Basic will be replaced with two new packages called Sky Starter and Sky Entertainment.



Sky Starter has 46 channels including all the free-to-air channels and costs $24.91 per month, while Sky Entertainment has 18 channels – including UKTV, Jones, Living Channel, Discovery, Vibe and BBC World – and costs $25.

Customers will have to buy Sky Starter – but only that – in order to buy any add-ons.





Sky customers who continue to buy both Sky Starter and Sky Entertainment as well as either Sky Sport or Movies will receive its premium drama channel SoHo at no extra cost. SoHo currently costs $9.99 per month.



Sky reported a 5 per cent drop in its revenues for the six months to December, to $433m.



But its net profit for the half year rose 12 per cent to $67m thanks to an 8 per cent drop in its operating costs.

Sky's interim results indicate it lost more satellite subscribers, but the size of the drop is not clear as the company did not split it out in its results.

Fellet said it might be months before the company could estimate how many customers now taking Sky Basic would downgrade to Sky Starter and said he assumed investors had factored-in "the worst that can happen".

He agreed Sky faced a Hobson's choice and said that if it hadn't acted it would have faced "slow steady decline" as it lost younger customers.

"This is hopefully an opportunity to reopen a discussion with them on Sky."

Sky was working on other options to broaden its appeal, Fellet said. These included a cheaper version of Sky that could only be watched on mobile phones.

"People might be willing to pay $15 or $20 to watch Sky Sports on their mobile phone," he said.

But to provide such a service, Sky would have to make sure "it can't be thrown to a big 64-inch screen", he said.

Sky would also look at a cheaper version of its Neon internet television services that did not include movies.