Sky to bag £50m through second price hike this year

Sky is increasing subscription prices again this year despite having introduced an inflation-busting hike in January.

Sky is increasing subscription prices again this year despite having introduced an inflation-busting hike in January.

Analysts said Sky had to raise prices so it could hit its target of raising £400 annually from each subscriber by the end of 2005. The latest hike will raise an estimated extra £50m a year

Sky wrote to customers earlier this month warning them of the new charges, which will come in on 1 September. People using its top-tier package - over half of its total 7.3 million subscribers - will have to pay £41 per month, an extra £1, representing a 2.5 per cent rise. In January, prices rose 5 per cent from £38 to £40.

The Sky spokesman said that some customers on cheaper packages would pay only an extra 50p per month. Those on its most basic package would pay no more at all. He added that the broadcaster would not increase prices again in January, but did not rule out further increases later next year.

Kingsley Wilson, media analyst at Investec Securities, said Sky's existing average revenue per user (ARPU) was £382. With an extra £12 a year from top-tier subscribers, it would be within striking distance of its target of £400 ARPU.

"Sky's reasoning is probably that its top-tier package has more on offer, such as more Champions League games and interactivity, so subscribers won't mind paying more," he said. "But it will have to explain to customers very well why prices are going up for the second time in a year.

"Without raising prices, it's arguable whether Sky can meet its ARPU target."