Record growth in connected services but Premier League costs dent Sky’s Q3 profits
Joseph O'Halloran | 17-10-2013
More people buying more products would please any business, but the at-all-costs necessity to retain English Premier League football rights has trimmed BSkyB’s third-quarter profits.
For the three-month period ended 30 September 2013, BSkyB reported an impressive 7% rise in revenues to £1.843 billion, driven by strong growth across all product lines including 800,000 new paid-for subscription products, a 50% year-on-year growth, taking the total to 32.434 million.
Yet the investment made in these new services, as well as the price of having to fend off the likes of Al Jazeera and BT Sport for football rights, dented adjusted operating profit which was £285 million, down 8% compared with the same quarter a year ago.
Programming costs were up 6% to £622 million, including not only the ratcheted up Premier League costs but continued investment in original UK commissions. Under the new three-year Premier League deal, Sky pays a flat amount of £760 million in 2013 and then more for the two subsequent financial years. Direct network costs were up 17% to £202 million despite a 21% increase in the volume of home communications products in the last 12 months and a 16% increase in unbundled exchanges.
That said, and in what is a very clear indication of where the future lies for the UK’s leading pay-TV provider, BSkyB also reported rapid growth in connected TV services with record growth in connected Sky+HD boxes, up 642,000 to 3.4 million. This represents a rise of 1.3 million compared with 2012, making it, said the company, the UK’s fastest-growing connected TV service.
Growth of core TV subscriptions maintained their flat trajectory, rising 1.46% year-on-year to 10.4 million. Responding to this flatlining growth, and showing how much the core assets are being sweated, high definition services grew 9.51% to 4.893 million, triple-play penetration was 36%, up three percentage points and the company revealed 219,000 net additions to its Sky Go Extra mobile TV service, taking the total base to 385,000. There was also a fourfold increase in on-demand usage.
Commenting on the quarterly results and noting the profit slippage, chief executive Jeremy Darroch said: “We have made a very good start to the year … Adjusted operating profit was in line with our expectations as we invest in new services and absorb higher Premier League costs … We are making excellent progress against the plan we set out in July to accelerate growth and returns from new services.
"The number of connected Sky+HD boxes grew by almost 50,000 a week, faster than in any previous quarter, and we are seeing an immediate increase in usage as customers get connected. While the consumer environment remains challenging, we are well placed as we execute a strong set of plans for the rest of the year.”
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