Introduction
Sky TV is a major pay-television provider in the United Kingdom and the neighboring areas. Sky TV offers various choices to its customers including TV broadcasting and internet broadband options. Sky TV’s PESTLE analysis mainly focuses on the business environment under which Sky TV operates. The PESTLE analysis is tasked with finding out whether the environment surrounding Sky TV’s business makes it easier or harder for the organization to operate.
Political
The United Kingdom has instituted several policies that have had a direct impact on Sky TV’s business operations. The amount of corporate tax in the United Kingdom used to be quite high, at the rate of 30% in the year 2007. However, the government has since sought to remedy this business environment by reducing the tax rates from 30%, then to 28%, and finally to the current 27%. Other than tax rates, the government does not have any significant control over the United Kingdom’s business environment. Nevertheless, the government dictates the country’s overall business environment. For instance, when the government institutes job cuts, there will be reduced spending among Sky TV’s potential customers.
Economic
Over the last few years, the economy of the United Kingdom has been faced by a recession. The recession has had a significant impact on Sky TV’s business because the United Kingdom’s citizens have reduced the amount of money that they spend on entertainment. Sky TV has reacted to this development by ensuring that the company offers customers competitive prices. Consequently, Sky TV has managed to maintain positive growth regardless of the recession.
Social
Most people consider Sky TV to be a legitimate British product. Therefore, most people around the United Kingdom expect Sky TV to offer trusted and unbiased news coverage. The Sky TV business is also known for offering one of the best sports’ coverage in the United Kingdom. On other hand, the Sky TV business model is aimed at serving several social, political, educational, recreational, and religious needs of the United Kingdom’s population.
Technological
Currently, Sky TV is grappling with a number of technological issues within the United Kingdom. First, the use of internet in television broadcasting has altered the market of this business. For instance, Sky TV is facing stiff competition from streaming sites such as Netflix and Amazon. Second, the use of technology has altered the pricing mechanisms that are used in the TV industry. Currently, most viewers are ready to pay for specific content as opposed to them paying for a packaged unit of television.
Legal
The British media is technically free, and the legal restrictions that govern this industry are quite few. However, the events surrounding the Murdoch-led news company saga indicate that it is possible for media businesses to get into legal trouble. Sky TV should be mindful of the rules and regulations that govern the media industry in the United Kingdom.
SWOT Analysis
Strengths
Sky TV’s main strength lies in its huge subscriber base. Sky TV has over ten million subscribers in both Ireland and the United Kingdom. In addition, Sky TV has managed to maintain significant growth even in the recession environment. The company’s huge subscriber base gives Sky TV the ability to have a clear advantage in various market segments such as sports. The company’s bargaining power (exclusive rights) in matters such as the coverage of the English Premier League is a big advantage for Sky TV.
Weaknesses
Sky TV‘s main weakness is its dependence on a healthy economic environment. The United Kingdom has faced serious instances of credit crunches and this development has had a significant impact on Sky TV’s growth. Currently, the economic environment in the United Kingdom has stabilized and this has given Sky TV a considerable reprieve. Sky TV is also experiencing reduced revenue from advertising as a result of diversification of the digital media.
Opportunities
Sky TV can benefit greatly from venturing into internet-based television streaming. On the other hand, it is up to the company to take advantage of its brand recognition and enter into the television streaming business. Current trends indicate that the future of television is in streaming services. Streaming has only gained track in movies and entertainment segments of television. Therefore, there is a big opportunity for Sky to venture into sports and news streaming which is still in its infancy.
Threats
Sky TV is mostly under threat from television streaming services such as Netflix and Amazon. In addition, the company stands to lose from any cases of economic downturn as witnessed in the last five years. In instances of economic downturn, pay TV customers might opt to shift to streaming services because they are competitively priced. Sky TV is synonymous with sports and news broadcasting and this puts limitations on the company. It is up to Sky TV to establish itself as an all-round entertainment provider so that it can be able to compete with other ‘entertainment-centric’ providers.
Porter’s Five Forces Analysis
Supplier power
Sky TV has enjoyed a limited concentration of suppliers in the United Kingdom such as the English Premier League and other advertisers. Consequently, Sky TV is the main supplier of pay and satellite television in the United Kingdom. The other notable suppliers within Sky’s area of operation are free to air providers who offer a differentiation of inputs to customers. The main shift in terms of supplier content came when streaming service providers started creating their own content thereby challenging Sky TV’s claim to exclusivity.
Buyer power
Sky maintains considerable leverage when it comes to buyer power as the company has managed to acquire exclusive broadcasting rights for certain events. Worldwide, Sky TV has close to twenty million customers and more than half this number covers citizens of the United Kingdom and Ireland. This development gives Sky considerable advantage when distributing services in this region. However, both legal and illegal streaming services have negatively impacted Sky’s bargaining power as buyers have little incentives and ready substitutes for television products.
Entry/Exit Barriers
Sky TV mainly operates in the United Kingdom and Ireland and this means that the company has little entry-barriers and more exit-barriers. The company’s prospects of entering into new markets are dependent on its hold on the main markets. Currently, North America has the biggest market for pay TV but the area is also rife with competition and proprietary content. However, the United Kingdom pay TV market is quite lucrative for Sky because it features high-entry and low-exit barriers.
Substitute Products
The most significant substitute products in Sky TV’s market segment are streaming services and free-to-use social networking sites. Currently, customers can access fresh and original entertainment programs from YouTube channels. On the other hand, customers can subscribe to streaming channels where they pay as per the content they watch. Other services like Hulu offer customers a chance to watch older content at great discounts.
Rivalry
Sky TV was previously engaged in a fierce rivalry with Virgin Media. However, this rivalry ended when Sky TV acquired Virgin media in 2010. Since then, Sky has only experienced rivalry from specific content providers such as BBC News Service and some sports channels.
Market Segments
Sky TV is currently the market leader in pay TV and satellite services. The company’s annual market capitalization stands at over three billion pounds. However, Sky TV is lagging behind in terms of expected annual revenue growth because it ranks fourth in this category. Other industry players such as Players Network Inc and Charter Communications Inc have little market segments but they are able to maintain high levels of revenue growth. The bulk of Sky TV’s customer segments are the middle and upper class families. However, young and middle-aged men form the bulk of Sky TV’s subscribers. Sky TV also has a major customer segment in pubs, restaurants, bars, hotels, and offices among others. The termination of the analog signals is set to open up new markets for Sky TV especially in the basic subscription categories. To capture the segmented markets, Sky TV should repackage its products and offer as many options to its customers as possible. On the other hand, the advent of internet-TV opens up new market possibilities for Sky because the future of television is in streaming services. Sky TV also has a huge potential for growth by venturing into the reality-television market, which is currently thriving in most parts of Europe.
Competitive Positioning
Sky TV’s main claim to competitive positioning comes from enviable coverage of sports as well as the introduction of High Definition and 3 Dimensional broadcasting. For instance, the corporation has substantial ownership in both Manchester United and Chelsea television stations. This gives Sky TV competitive positioning among the fans of these two football clubs. Sky TV’s competitive positioning led to the acquisition of Virgin Media in 2010. Sky TV has also made an effort to capture mobile and internet television users across the divide. For instance, Sky has introduced applications that enable viewers to access certain channels at all times. The rights to broadcast the English Premier League are a good boost to Sky TV’s competitive differentiation. In future, Sky TV can harness its competitive positioning by embracing technology. In the course of the last decade focus has shifted from television content to the mode of delivering it (the content). Most users tend to embrace the TV-delivery technology first and then proceed to sift through its contents. For example, both 3D and HD television technologies have had considerable success when they came up. Currently, focus has shifted to streaming and it is up to Sky TV to align its operations with this technology. In addition, streaming services have a huge benefit because they have a global appeal. Sky TV has potential to venture in markets in both Asia and Africa where football viewership is quite high. This goal can be accomplished through the adoption of ‘borderless’ technology such as streaming. Furthermore, Sky TV will capitalize on its exclusive broadcasting rights through its streaming services.