Analysts had predicted a “perfect storm” of falling subscriptions and spiraling ad revenue – but, as new research today shows consumers are watching more TV, BSkyB (NYSE: BSY) has other plans. In the six months to December 31, it saw pre-tax profit rise 26 percent from the year-ago period to £388 million, on six percent better revenue of £2.6 billion; average revenue per customer was up five percent to £444.
Yet there must still be some doubt over the company’s stated aim of reaching 10 million subscribers by 2010 — Sky added 171,000 customers in the three months to December 31 – 167,000 higher than growth a year ago. But, with 9.24 million subscribers so far, it would need at least four consecutive quarters of the same growth to reach the target. The company says its tightly controlling costs, but it plans to create 1,000 installation and customer service jobs this year. With UK unemployment approaching two million and disposal income only heading in one direction, could these figures represent the time before the real storm?
— Broadband, phone lift: BSkyB claims to be the UK’s fastest-growing ISP with 1.95 million Sky Broadband subscribers as of December 31, up from 1.79 million in September 08, and also the fastest-growing fixed line phone provider with 1.5 million customers, up from 1.36 million in September 08. Sky only has 13 percent “triple-play” customers taking broadband, TV and phone services. No word on how the recently launched Sky player TV subscription online VOD service is doing; that could suggest it hasn’t yet made much of an impact, though it only launched in December.
— Sky+ helps growth: A real bright spot for Sky has been the VOD Sky+ box which, helped by a multimillion pound marketing campaign, was taken up by more than half of Sky’s 171,000 new customers in the second half of ’08 and is now in 4.6 million homes. Sales of the HD version also increased 188,000 to 779,000 — making an extra £80 million in revenue on an annualised basis. And the company is aggressively cutting the price of the HD box to £49, down from the average price of £150 in H208. All this may have contributed to overall churn reducing to 9.9 percent, from 10.9 percent a year ago.
— Advertising: Despite talk of a collapse in marketing budgets, Sky’s ad revenue was just one percent lower year on year at £165 million — in a market the company estimates fell 10 percent in the six months to December 31.
— Financials: Investors may have been spooked by talk of a collapse in public interest in TV subscriptions, leading to a 10-year low share price of £3.50, but they should be calmed by an operating margin of 14.9 percent of sales and earnings per share growth of 34 percent to 13 pence. Shares rallied in early trading to a high of £4.69.
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