BSkyB grows subscribers - but at a cost
Thursday 03 February 2005
However, there was concern in the City at the price the satellite company is paying to execute the growth strategy outlined in August last year by its chief executive, James Murdoch. At the time, Mr Murdoch admitted that customer growth had stalled, adding that the company needed to invest heavily to reach out to consumers.
The half-year figures reported yesterday showed that "subscriber acquisition costs" (SAC) rose 10 per cent to pounds 230 a customer - about double the increase expected by analysts. "We said [in August] that SAC would rise. It's the right place to be investing money, it's investing in growth," Mr Murdoch said.
In the last three months of 2004 - the second quarter of Sky's financial year - the company added 371,000 subscribers, its best quarterly performance for two years. After counting customers that left during the quarter, the net subscriber figure was 192,000 - well above City forecasts of some 150,000. That took the company to 7.6 million customers - on course, it said, to hit its target of 8 million homes by the end of this calendar year.
Sky began a massive advertising campaign in October, promoting its lower- tier packages for the first time, as the company began a drive to get to a fresh target of 10 million subscribers by the end of the decade. Kingsley Wilson, at Investec Securities, said the rate of increase in subscriber acquisition costs "took the gloss off a great set of numbers".
But he added: "Although SAC went up, so did margins. A land grab is expensive but what Sky is saying is that it is doing a measured land grab."
Expenditure on advertisements jumped 72 per cent for the half-year to pounds 43m. Other marketing costs, which include the subsidy offered by Sky to install its equipment in customers' homes, rose 12 per cent to pounds 193m, taking total marketing costs in the period to pounds 258m, a 20 per cent increase on 2003.
Paul Richards, an analyst at Numis Securities, said each new customer, over the life of a subscription, was worth about pounds 1,500 to Sky.
"Regardless of whether they're paying pounds 210 or pounds 230 for new customers, it's still a pretty good payback.... Sky has reiterated all its margin targets and it wouldn't be doing that if SAC was spiralling out of control," Mr Richards said.
Pre-tax profits rose 18 per cent to pounds 154m for the half-year, while turnover was up 10 per cent at pounds 1.9bn.
- 1 Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
- 2 To help fuel their propaganda machine against the poor, our government has now decided to redefine the word 'welfare'
- 3 Halle Berry takes ex-boyfriend Gabriel Aubry to court for allegedly trying to make daughter look less African-American
- 4 Isis propaganda image showing 'abuse of Muslim woman by soldiers' is actually taken from Hungarian porn film
- 5 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Turkish President: 'Equality between men and women is against nature'
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Ferguson decision: Tea Party website mocks Michael Brown's family over T-shirt typo
Michael Brown shooting: Ten things we know – or know better – now the Ferguson grand jury's work is over
Isis propaganda image showing 'abuse of Muslim woman by soldiers' is actually taken from Hungarian porn film
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
France 'blocks' Russian sailors from boarding a warship
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Revealed: How the world gets rich – from privatising British public services
iJobs Money & Business
£Attractive: Citifocus Ltd: High calibre individual with significant product d...
£Negotiable: Citifocus Ltd: Leading global bank seeks experienced credit analy...
£Attractive Package: Citifocus Ltd: High calibre individual with a high degree...
£Attractive: Citifocus Ltd: High calibre individual with superior academics an...