BSkyB is an investor in Roku, and the box is built on Roku’s technology. Roku is a lot more expensive than Now TV, though, with a box starting at £49.99 in the U.K.

The Now TV box’s content offerings are also more limited than Roku’s. To start, the box offers access to the BBC’s iPlayer, the BBC News app, Channel 5′s VOD service Demand 5, Sky News, Spotify, Facebook and Flickr. Viewers can also buy a subscription to the streaming service Sky Movies (£8.99 a month for the first three months, then £15 a month) or a day pass to Sky Sports (£9.99 for 24 hours). Sky says it will add more offerings to Now TV over time.

BSkyB earnings: More households connecting their TVs to broadband

BSkyB also released its annual earnings report Friday. In the report, the company notes that “more than 2.7 million customers, one quarter of our TV base, have now connected their Sky+HD boxes to broadband, a rise of 170 percent on last year….meanwhile, our mobile video service Sky Go continues to perform well with quarterly users up 19% to 3.3 million, 166,000 of whom are now paying £5 a month for our new subscription service Sky Go Extra.” (Sky Go Extra lets users download movies for offline viewing on smartphones and laptops.)

Moving forward, the company said, “we will step up the roll-out of connected boxes across our base by offering a low-cost wireless connector to customers that have a Sky+HD box but haven’t yet connected it to broadband. We will also launch a new WiFi-enabled Sky+HD box as standard from September, rolling it out to targeted groups of customers who don’t yet have Sky+HD boxes.”

Miller, a former CEO of AOL, joined News Corp in 2009. He was tasked with developing a digital strategy for a diverse set of properties that included everything from MySpace to Photobucket at the time. He was also asked to make digital a priority across the company’s many news and entertainment divisions.

Miller’s parting was amiable, according to All Things Digital, which first reported the story. That sentiment was echoed in a News Corp announcement in which the company said he would stay on as an adviser and CEO Rupert Murdoch praised him as “a visionary in the digital media industry.”

The departure appears to be related to News Corp’s impending split. Lucrative entertainment assets like Fox and BSkyB will be spun off into one company and the publishing properties into another.

While presiding over News Corp’s far-flung digital assets, Miller made sensible moves such as offloading MySpace, which the company had acquired for $580 million in 2005. The divesture was consistent with a statement in News Corp’s 2012 annual report that its digital strategy is no longer acquisition-based.

Miller’s other activities included supervising News Corp’s $45 million investment in streaming device maker Roku and working with Hulu, where he was a bord member.

Miller is also an active angel investor with deep contacts in the media space. He joined us at the paidContent 2012 conference, and you can hear his thoughts on digital media here:

[ooyala=Y3MDB4NDokkExfKK0mTX2hG4ph8JgdT]

“The launch of a second brand is an exciting opportunity for us and the rationale is very simple. Having two brands will allow us to meet the needs and preferences of different customer segments more effectively,” CEO Jeremy Darroch told The Guardian’s Changing Media Summit on Wednesday.

“We’ll offer two distinctive ways to watch: the market-leading full Sky service for the whole family, complete with the widest range of channels, high quality products like Sky+, HD and Sky Go, and the peace of mind of a monthly bill; or the flexible, more spontaneous, pay-as-you-go service of NOW TV.

“Because NOW TV will also be ‘powered by Sky’, customers will still know that it will give them the best, exclusive content and a high quality experience, from a provider they can trust. Either way, we believe we can offer even more customers a product that’s just right for them.”

The Now TV placeholder website is now live, taking consumers’ expressions of interest.

Darroch did not exactly specify why Sky needs a separate brand in over-the-top (OTT). But it may be about balancing caution with the brave new connected TV opportunity. If Sky branded its new OTT service “Sky” and made it cheaper, disgruntled satellite subscribers may downgrade to the OTT option.

Another company which span off a separate entertainment brand last year was Netflix (NSDQ: NFLX), which caused controversy when it created “Qwikster” to operate its DVD rental business separate from its streaming business.

After pioneering pay TV in the UK two decades ago, Sky last year hit its target of achieving 10 million customers for its satellite pay service. Satellite customers now get access to their channel bouquets through Sky web, mobile app and connected TV app channels.

But this January Sky said it would now offer its channels without a long-term contract and without satellite to customers over an array of internet devices, including connected TV and iPad. Packages will be movies, entertainment and sport, but the firm may also peel off individual shows for payment.

“The long-awaited explosion of connected devices is now upon us,” Darroch said. “This opportunity will only grow. It can be very complementary to our service.
Thirteen million homes don’t take pay TV from any provider – we can reach out to them.

“Any notion Sky is still just a satellite broadcaster should have well and truly gone out the window by now.”

Both companies’ boards have approved the deal. But the interesting part is: why does News Corp. (NSDQ: NWS) which co-owns NDS together with Permira, want rid of the software which powers its BSkyB (NYSE: BSY) and DirecTV (NYSE: DTV) PVR boxes, as well as Canal Plus’?

$5 billion in cash may be one reason, something which could provide a welcome dividend to worried News Corp shareholders.

But a big shift is also about to happen in TV distribution and reception, and it means less of a role for old-line set-top boxes and the satellite and cable infrastructure above and behind them.

BSkyB will this summer unbundle its own-brand pay-TV channels from satellite, offering them to direct subscribers via connected TVs, game consoles, tablets and other devices, all through landline internet. It has also acquired an out-of-home WiFi network so subscribers can watch mobile TV in cafes. And it recently invested in Zeebox, a social TV app startup that can change TV channels from iOS.

Much of this would radically change the importance of the conventional box under the TV, even if the market is nevertheless currently replete with dedicated internet TV boxes vying for market share, before the majority of TVs sold have such features integrated.

In emerging markets, where Cisco wants to take NDS, broadband networks are less established. And the change won’t happen overnight in the west either. Cisco says many NDS clients have five-year contracts. Cisco’s announcement does not say whether DirecTV and BSkyB have committed to renew with NDS.

In 2008, a California judge dismissed a claim from rival Echostar (NSDQ: SATS) that NDS hired computer hackers to crack its TV access card’s encryption. Last September, the claims resurfaced in a case filed by disgruntled News Corp shareholders, who claimed the company had sat on information about the EchoStar case.

NDS’ main assets are its VideoGuard DRM software and MediaHighway, middleware used to deliver EPG and PVR on set-top boxes. The company also has its own over-the-top TV product called Infinite TV.

Cisco wants to ally NDS with its Videoscape multi-screen viewing platform, though the company will remain independent. CEO John Chambers (via release): “Our strategy has always been driven by customer need and on capturing market transitions. Our acquisition of NDS fits squarely into this strategy, enabling content and service providers to deliver new video solutions that leverage the cloud and drive new monetisation opportunities and service differentiation.”

Cisco has previously snapped up the Tandberg TV distribution provider.

The Competition Commission had already preliminarily ruled Sky’s position anti-competitive and proposed a number of remedies, including forcing Sky to carry rivals like Netflix and Blinkbox on its own TV set top box.

Now it has changed the goalposts ahead of a final conclusion, by deciding to also consider the recently-launched over-the-top internet movie services (announcement). That makes escaping without charge more likely for Sky, which had for months protested to the commission that such new services mitigate against its own domination.

Despite the arrival in the marketplace this Q1 of Netflix and Lovefilm Instant, which have signed deals with minor studios, most Hollywood studios still exclusively license first-run S-VOD to Sky Movies. But Netflix’s hubris, if it can be believed, may give the Competition Commission reason to believe this situation is not set in stone…

“We could just bid against them (Sky),” CEO Reed Hastings told paidContent when launching in the UK in January.

“We are not dependent on whatever the Competition Commission does.”

If Hastings was being straight, that no longer sounds like a monopolistic market. If Netflix can out-bid Sky Movies for Hollywood, the commission would be hard-pressed to find the situation anti-competitive.

But BSkyB (NYSE: BSY) is rich, Netflix is already incurring massive losses on internationalisation and Hastings may just have been talking the talk – after all, such talk is a long way from Netflix’s admitted “moneyball” strategy of scooping up low-grade rights.

Lovefilm and Netflix already hold first-run S-VOD rights from one major studio, Paramount (NYSE: VIA), for Germany, the U.S. and Canada, suggesting the problem may not be insurmountable. Or the arrival of Netflix and Lovefilm may only succeed in pushing up the prices Sky Movies must pay studios in a bidding war.

BSkyB is also due to make Sky Movies available to those without Sky’s satellite service over internet TVs, game consoles and tablets this summer, on both a subscription and pay-per-view basis.

This inquiry relates only to subscription first-run movies. That is a model on which Netflix and Lovefilm Instant are, perhaps unwisely, going toe-to-toe with Sky, as well as with each other.

But another model may also make competition more likely – pay-per-view. Others like Blinkbox and Filmflex look well-positioned with simple propositions that take individual movies to consumers for individual fees without the need for a subscription. It is a model in which Hollywood rights are easier to come by. Sky also holds PPV movie rights, exploited through its Sky Movies Box Office brand, which it will also bring to its internet TV service.

Telegraph Media Group, whose current iPhone and Android apps are free, will shortly unveil replacements that will be “free” only to Telegraph print subscribers (£7 per week) and iPad subscribers (£9.99 per month).

Those who want only the mobile app will get a one-month free trial before a mobile-only fee kicks in, but The Telegraph is not disclosing that pricepoint until release in the next few weeks.

New features include a deal with ESPN (NYSE: DIS), whose own Goals mobile app shows Premier League goal highlight videos, to include the same.

No Telegraph web fee has yet been implemented despite 2011 chatter.

Meanwhile, Sky News has upgraded its iPhone app with incremental feature enhancements but no new business strategy.

The broadcaster’s iPad big cousin requires a £4.99 per month subscription or a BSkyB (NYSE: BSY) satellite account. But the upgraded iPhone app remains free.

The new one includes galleries, timelines, interactive graphs, a technology news section and article swiping.

The Telegraph’s strategy is a full realisation of a model its counterpart Guardian also operates but doesn’t execute as full as it might. Although The Guardian’s iPhone app requires subscription, Guardian advertising promotes its free mobile website and not the app.

“There’ll be a spectrum all the way down to individual shows – we’ll see how far we get,” finance chief Andrew Griffith said at the FT Digital Media Conference in London.

Imagine a world without satellite dishes. By this summer, Sky, in a bold step, is due to launch subscription movie, sports and entertainment bundles on connected TVs, game consoles and other devices without the usual necessity for its core satellite subscription.

But, although those bundles will be offered on a month-by-month basis, more granular options will also be on offer…

“There’s a lot of growth left in cable and satellite platforms in the UK,” Griffith told the conference. “But a psychological barrier has been the need for a dish, a 12-month contract because of the way we put set-top box in to the market and the perception (though not the reality) that you need to buy a bundle.

“Over-the-top platforms facilitate new services that are more pay-as-you-go. That’s not necessarily deflating in terms of price – some of those pay-as-you-go services are more expensive – but they could reach out to a much larger base than the 13 million or so people who take (UK) pay-TV today.”

It’s a far cry from the BSkyB (NYSE: BSY) we have come to know, which regards its satellite/broadband/telephone subscription as core, and potentially a step-change for premium TV video…

Soon, Sky will be offering not just Sky Movies and Sky Sports monthly subscriptions over IP-enabled devices, but also content like individual pay-per-view movies via Box Office, individual sporting events or tournaments, subscriptions only to individual drama series and even one-off rental access to individual episodes – all over internet TV devices like consoles, set-top boxes and tablets.

But how much will it cost? Sky’s new IPTV bundles will likely be priced higher than the new online subscription offers from Netflix (NSDQ: NFLX) (£6pm) and Lovefilm (£5pm), to reflect its better content line-up, but could go cheaper than or equal to the equivalent packages on its own satellite platform. After all, the new offerings won’t come with any of the infrastructure costs of satellite.

“We’re in a market with really good headroom for growth,” Griffith told paidContent at the FT Digital Media Conference. “Cable and satellite are only in 55 percent of homes, 40 percent of homes have never paid anyone for TV although they have paid for content like DVDs.

“I don’t think our content is expensive. You can buy all our content for less than the cost of a first-class stamp every day.”

In other words, don’t bet against the new IPTV bundles being roughly the same price as they are on satellite.

“You won’t have too long to wait before we announce the launch of that,” Griffith continued. “It’ll be on multiple devices, as near ubiquitous as one can make it. We will make it available on all the scale platforms.”

Update…

Sky on Thursday confirmed it will rebrand its current PPV strand Sky Box Office as “Sky Store”.

Zeebox, an iOS app that augments live TV shows with interaction, show information and click-to-buy, will this Saturday air the first of 12,000 commercials on Sky and Viacom (NYSE: VIA) channels in the UK through March and April, in time for an upcoming new version with enhanced Twitter features, HD channel support and push notifications.

The airtime is part of the deal, worth more than £10 million, which Zeebox struck in January with BSkyB (NYSE: BSY), which involved funding, Sky Media selling ads inside Zeebox and Zeebox supplying its social service in to a next-generation Sky+ mobile EPG. Sky Media, Sky’s ad sales house, also sells ads for Viacom channels.

Zeebox, which paidContent revealed in August, gathered 300,000 unique users since launching in October. The app pulls together Twitter and Facebook interactions for shows. Users who also have internet-enabled TVs can use Zeebox’s EPG to change channel as though it were a remote control.

Other social TV services, like GetGlue and Miso, exist, but Zeebox has made a big impact very quickly with early adopters and industry types thanks to its diverse feature set and links with the UK broadcast sector. The startup claims average session time is 30 minutes and 27 percent of users post about shows to Facebook.

Zeebox is also now executing on its earlier promise to let broadcasters build custom interactivity in to the app, which Channel 4 earlier trialled for its Desperate Scousewives show. The company is calling this feature OpenBox Showtime, which lets broadcasters include their own custom branding and other features in otherwise generic show pages. BSkyB is now using this for its Got To Dance show.

Zeebox says that, for shows which have trialled OpenBox Showtime so far, an impressive 93 percent of users stay using the app features until their show ends. Meanwhile, over half of users click the info tags embedded by broadcasters.

The startup is also now going to market with its other main plank – a viewer insight service it wants to offer to broadcasters, which it says it can give minute-by-minute ratings information about audience habits within shows.

TV subscriber additions fell to 40,000 in Q2, from 140,000 the previous year. CEO Jeremy Darroch conceded to City analysts: “Some people are uneasy about making a long-term commitment right now.”

But half-year operating profit rose 16 percent to £601 million on six percent higher revenue of £3.36 billion and average annual customer revenue rose £8 to to £544. Total customer base grew 100,000 to 10.4 million.

“The company made a number of announcements which confirm that – beyond the near term slowdown – structural issues are looming,” Bernstein analyst Claudio Aspesi writes in a research note.

“While we believe the Pay TV business is inherently more defensive than advertising-funded ones, the depth and length of the downturn in the UK economy are still unknown: any significant changes to our forecasts for the UK TV ad market could be large enough to change the outlook for the stock.”

In the worsening consumer economy, Sky is trying to sweeten existing subscribers with new accessibility…

• Device access for subscribers: Sky Go, for watching Sky on non-satellite devices, got 1.5 million unique users in December and is launching on Android in February, with new channels Sky 1, Sky Living, Sky Arts 1 and Sky Sports F1 being added.
• Public WiFi for subscribers: Sky is about to launch its public WiFi service based on its The Cloud acquisition, giving Sky Broadband Unlimited customers free access to over 10,000 public hotspots.
• Fibre premium, wider footprint: Fibre broadband launching from April at up to 40Mbps for £20 per month. Meanwhile, Sky is extending its copper network to 88 percent of UK (an extra million homes) by June 2013.

And there are new threats…

• Cheaper internet TV alternatives: Sky will de-couple its movie, sport and entertainment content from satellite by taking it to the coming wave of connected TV owners as post-satellite pay-as-you-go pay-TV – an attempt to head off internet TV apps from operators like Netflix (NSDQ: NFLX), Lovefilm and Blinkbox.
• Premier League bidders: Al Jazeera Sports may bid up renewal prices in the next rights round. “We’ll have to see what noise there is in the market and who we think may be there,” Darroch told analysts. “It is a blind auction, it’s a sealed bid, but it goes through rounds. Not all packages are awarded in the first round.”

“The unbundling of pay-TV appears a direct response to the launch of Netflix, but also seems to suggest that additional growth through the old model of bundled pay-TV through satellite is coming to a natural end in its growth,” Bernstein’s Aspesi writes.

“The performance of BSkyB (NYSE: BSY) hinges on the continued availability of premium content in the face of possible new entrants determined to build competitive pay-TV businesses over different platforms.”

The as-yet-unnamed and unpriced service will offer Sky Movies, Sky Sports and entertainment over a swathe of devices including tablet, mobile, console and connected TV. There will be no minimum contract and “a wide variety of pricing options”.

It may not look like it today, but this may turn out to be one of the most significant developments in Sky’s history.

Sky has offered TV to internet devices since 2006 but, currently, all such efforts, including Sky Go and the Sky News iPad app, are geared at providing enhanced value for existing Sky satellite subscribers. Where Sky has allowed non-satellite subscriptions, they have been so prohibitively priced relative to satellite that the idea has, in essence, been to drive satellite subscriptions.

The risk for Sky was that the new wave of internet TV services – including from consoles, dedicated boxes, integrated connected TVs that ship with thousands of free on-demand services and the emergence of cheaper over-the-top operators like Netflix (NSDQ: NFLX) and Blinkbox – would tempt existing and new consumers away from the core Sky satellite option.

Already, Sky TV sign-ups are slowing – down to 40,000 in Q2, from 140,000 the previous year, Sky announced on Tuesday. “Some people are uneasy about making a long-term commitment right now,” CEO Jeremy Darroch conceded to City analysts.

So it is logical for Sky to turn that threat in to an opportunity – the opportunity to take its top-tier pay-TV content to a new generation of otherwise pay-TV refuseniks, minus the cost of satellite.

Consumers are expected to be able to subscribe to Sky on YouView; TVs from manufacturers like Samsung, Sony (NYSE: SNE) and LG; (SEO: 066570) Xbox; iPad and more.

Sky has been wedded to and defined by its satellite distribution system since launching it in 1990. But, by allowing customers to subscribe to Sky Sports, Sky Movies and so on directly on the internet TV they buy in 2012 and beyond, Sky is de-coupling its content and its distribution platform in the future.

CEO Jeremy Darroch told analysts: “It will give another choice to the 13 million UK households that have chosen not to subscribe to pay-TV. It will be a new way to reach out to consumers who love great content but have no need for the full range of Sky services.” There will be “no infrastructure investment”.

“Beyond the near-term slowdown, structural issues are looming,” writes Bernstein analyst Claudio Aspesi in a research note. “The unbundling of pay-TV appears a direct response to the launch of Netflix, but also seems to suggest that additional growth through the old model of bundled pay-TV through satellite is coming to a natural end in its growth.”

Fascinating to watch Sky reinvent itself in OTT world. My prediction- number of subscribers to its core satellite service to halve by 2015.

— Wil Stephens (@wilstephens) January 31, 2012

Sky will lose a lot of its turnover but become immensely profitable as it strips out huge infrastructure costs associated with legacy biz.

— Wil Stephens (@wilstephens) January 31, 2012