From shampoo to set-top boxes: the rise of Jeremy Darroch
BSkyB's chief executive is using lessons learnt selling Pantene at P&G to clean up in the media sector
Jeremy Darroch might have spent close to a decade at BSkyB, but it is surprising to hear how much of his management thinking takes him back to the soap powder and toothpaste world of Procter and Gamble. Far from the high-tech paraphernalia of set-top boxes, mobile phone apps and broadband, Mr Darroch, a likeable 50-year-old Geordie who spent 12 years among the Clearasil and Vicks VapoRub, is still keener to put himself in the mind of the consumer, not the media luvvie or broadcasting engineer.
A project he remembers being impressed by was when P&G singled out a small hair oil maker called Pantene from a company it acquired and built it into the biggest hair care brand in the world.
"It is incredible how you can take something like that and turn it into a huge new profit stream," Mr Darroch said. "There are parallels between that and content actually. You have this whole pipeline of ideas and often it is quite unpredictable which ones will land and be successful."
Mr Darroch is on the hunt for hits at the moment. The chief executive is fulfilling a pledge to hike spend on home-grown programming by 50 per cent to £600m a year by next year, hopefully giving customers more reasons to join and fewer reasons to leave.
It means that Sky, which was built on the lure of films and football, is spreading out into arts programming, comedy and now drama. The move marks the latest rounding out of the business, which in the past five years has moved from dish to download thanks to an internet push.
"The business has become very good at rotating its focus to where it sees an opportunity and pushing into that. That won't change as the market starts to open up and we see more distribution platforms."
Now a third of its customers take the "triple play" of TV, phone and broadband, where recent acquisitions have made it the country's second-largest provider after BT. Meanwhile 40 per cent of Sky's base has also signed up for the high-definition service. But the recent wave of activity has gone further.
There is Now TV, an internet service popular with students that Sky launched to pick up customers who didn't want to commit to a contract and Sky Go, for customers who want to watch on tablets or smartphones when they are on the move.
On-demand film rental through the set-top box puts Mr Darroch directly in competition with Netflix and Amazon-owned Lovefilm. He thinks there is room for all. "When I first joined Sky having not worked in the media industry I was always slightly surprised at how obsessed with itself it was. It tends to define everything as a little bit of a zero-sum game and I think that is a mistake."
But there are signs that the entertainment industry is upping the ante. From next year, Sky will pay £760m for its Premier League rights, still a cornerstone of its output, up from £541m, after BT dived into the auction.
"It is a huge bet for them and I'm sure they'll be very focused on trying to make it successful," Mr Darroch said. He knows BT boss Ian Livingston well, having been recruited to work under the Scot at electricals chain Dixons. Both have risen a long way, but if things had gone differently, Mr Darroch could have climbed even further.
He was widely expected to take a key role at News Corporation when Rupert Murdoch's group bought out the 61 per cent of the company it didn't already own, combining Sky in Britain with the pay-TV businesses in Germany and Italy. The outcry over the phone-hacking scandal saw bid hopes disintegrate two years ago.
"The business didn't really miss a beat through that period," he said.
That might not be the last of it. Only last month, James Murdoch, Mr Darroch's predecessor who retreated to News Corp in New York after being drawn into the phone-hacking net, described minority investments such as Sky as "unfinished business".
The pair were an effective double act and Mr Darroch backed James Murdoch to keep the chairman's seat, which he eventually relinquished.
"These things happen. I was sad to see him step down but I think he reached his decision which was the right decision at the time and then you have to move on." So does Mr Darroch expect News to brave the political maelstrom and try to bid again?
"If they do then we will deal with that at the time," he says. "My job is to make sure the business is in as good as shape as it can be and if I do that I'm doing the best job for all of our shareholders."
When the deal collapsed, there were calls from some shareholders to plot a course independent of News Corp. One glance at the board suggests that is easier said than done. While it has the requisite independent directors, it also has long-term Murdoch lieutenants such as Chase Carey, the magnificently moustachioed News Corp deputy chairman who tabled the takeover bid three years ago.
There have been times when independent investors grumbled they weren't seeing enough cash returns because of Sky's loss-leading investment in dishes or broadband. That isn't the case now. Sky has turned into a cash machine, buying back £1.25bn of its own shares in the past two years and hiking the dividend by 20 per cent, with the expectation there is more to come.
All that early investing is paying dividends now. Acquiring Lord Sugar's Amstrad meant it could produce more-efficient set-top boxes, which are already in 2 million homes. They can be upgraded remotely with software drops, reducing the need for future van deliveries. On the cards next, thanks to that internet connection, is advertising targeted to the individual viewer. Everywhere you look on a site tour, there are signs of Sky taking greater control of its supply chain, including working on its own mobile phone apps and even insourcing some of its army of engineers. Extra studio space is planned so the company will use Pinewood or Elstree less often for filming.
The media campus that is taking shape in west London houses 7,000 staff, but that will rise to 12,000 over time. A grey tower with a wind turbine on the top that houses floors of high-tech control rooms for Sky Sports News and other channels already dwarfs the low-slung buildings from where the broadcaster started out.
Mr Darroch had similarly humble beginnings. His grandfather was a miner and his father a tax manager, which might explain his first job in accountancy.
A move to P&G took him as far as Germany before returning home so his GP wife Rachel could carry on practising. So long focused on the man on the street in his career has created a straight-talking frontman for an empire that has worked hard lately to warm up its image.
Compared with the crisis that engulfed the BBC last year, Sky's progress has been incredibly smooth. Mr Darroch's team are still trying to learn more lessons, however, including from Dave Brailsford, the Team Sky supremo who has been known to pop in to give motivational talks.
"There is a real symmetry between both organisations," Mr Darroch said. "We try to reapply learnings, and things that we are good at we can pass on to them."
It must be handy having a cycling boss on hand for a company that is always on the move. Where does it stop? He can't say. "I think as a business we are always seeking to do new things. Our journey is one of almost perpetual renewal."
Sky by numbers
£568 average annual customer bill, up
£24 on a year ago
10.74m number of UK and Ireland customers
£760m amount paid per year to show Premier League football from next season
3.1m Sky Go users
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