Sky shrugs off downturn to lift profits and new subscribers
BSkyB posts a 4 per cent rise in operating profits as its rivals struggle
Friday 31 July 2009
The broadcasting juggernaut that is BSkyB has shrugged off the downturn and the advertising problems dogging free-to-air rivals to lift profits and post its strongest customer growth in five years.
Yesterday Sky posted a 4 per cent bump in operating profits to £780m in what the chief executive, Jeremy Darroch, called an "excellent year of growth". The group said it had added 462,000 net new customers in the year to the end of June, with new customers taking more products than ever before. "We see a substantial opportunity ahead for our business," Mr Darroch said. "Our focus on the customer and our growing capability as an organisation positions us well to build a more profitable and durable business for the long term."
Sky also announced that its high definition service had attracted 1.3 million customers, more than doubling during the year despite the extra charges. It first launched HD in 2006 and has heavily invested in the service since. Mr Darroch said: "This is the year where high definition television moved centre-stage."
The group said it had created 1,000 new jobs since January to support the growth in Sky's high definition service. About 9 million homes have HD-ready sets in the UK, and this is expected to rise to 14 million by the end of the decade. The company said its broadband and home phone services were developing, with "plenty of opportunity for growth ahead," according to Mr Darroch.
Paul Reynolds, an analyst at Deutsche Bank, said: "Sky has set itself apart as a company in the sector that has successfully reinvested in its business, clearly continues to offer the right products to new and existing customers and has a robust profit outlook for the medium term."
Some have expressed their surprise that a pay TV channel can continue to build revenues in the face of a downturn. A spokeswoman for the group said customers appreciated that Sky consistently invested in programming and innovations, while some of the free-to-air broadcasters have been restricted. "We are doing it at affordable prices. You can get the basic package for less than a can of Coke a day, or the 'all you can eat' package per month for less than a family would spend in one night," she said.
Sky expects more subscribers after a strong summer of sport, and announced further innovations for the coming year. The group confirmed it would launch a video-on-demand service next year, similar to that provided by its rival Virgin Media.
Sky also revealed it would launch the first three-dimensional channel, offering movies, entertainment and sport. Sky said it would broadcast the service using the existing HD infrastructure. It expects 3D-ready televisions to be on sale next year.
Sky was the first television company in Europe to broadcast a live event in 3D, with a performance by the band Keane from Abbey Road Studios. Brian Sullivan, the managing director of Sky's Customer Group, said: "This is latest step in our commitment to innovating for customers."
There are still clouds overhead after Ofcom came out with its preliminary report into the pay-TV market. The regulator initially proposed that Sky should wholesale its premium content to rivals at regulated prices, which sparked a furious response from Sky.
Yesterday, the group said that while the investigation was ongoing, "no evidence or argument offered so far alters our belief that there is no proper justification for intervention to require Sky to wholesale its premium channels and to regulate the wholesale price of these channels".
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