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07 Nov 07
Country: UK
Region: Western Europe
Source:
Online Services/Intelligence/TV and Broadband/Updates
Pay TV operator BSkyB has exceeded expectations of Sky Plus subscriber growth but its operating profit was lower than expected due to increased programme, broadband, and marketing costs. The company reached 8.67m subscribers at the end of September 2007, adding 83,000 net new subscribers in third quarter of 2007. Broadband net additions were 223,000 and 153,000 new telephony subscribers signed up.
But the most impressive growth took place with the Sky Plus offer, with 323,000 net additions in just one quarter to reach 2.7m boxes at the end of 2007. Another positive result was the decline in churn rate from 12.1 per cent at the end of June 2007 to 11.3 at the end of this quarter, the lowest for five quarters. Total annual ARPU experienced a decline of £1 in the quarter to £411, which primarily reflected the loss of PremPlus revenues (Sky's former pay per view service). ARPU includes £16 of broadband and telephony.
Our take...
The good performance in terms of customer growth and reduction in the churn rates has also increased BSkyB's operating costs, with higher marketing and programming costs. Operating profit declined from £183m in the quarter to September 2006 to £150m in the same period of 2007.
To attract new broadband customers and compete with Virgin Media's triple-play offer, BSkyB increased marketing expenses 22 per cent in the quarter. In less than a year and a half, the company has achieved more than 1 million broadband customers, and 488,000 customers now choose the TV, internet and telephony pack, a 54% increase from last quarter. On another negative side, Sky also estimates that the non-renewal of the contract to supply its basic channels to Virgin Media will impact the operating profit by around £15m for each quarter that the channels remain off the platform.
Other costs affecting the operating profit are the increase in Sky Plus subscribers representing an extra cost of around £100 per box and programming expenditure, which has increased by £10 million mainly due to the new Premier League contract and increased investment in Sky One.
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