BSkyB: On way to 30 HD channels
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| Chris Forrester, on 30-04-2008
BSkyB’s headline Q3 results were sound, with CEO Jeremy Darroch (pictured, left) saying HD is at the core of Sky’s thinking. This will see the company taking its HD offering beyond 20 channels and towards 30, which would be the world’s largest HD offering outside North America.
“HD is at the core of our thinking,” said CEO Jeremy Darroch. “HD willlead in how we innovate new products.” He hinted that Sky was lookingat greater hard-drive storage, and saw HD as being the core Sky+product, with lower box costs and the intention to remove or reduce theHD installation charge as a barrier to entry. However, he said the £10a month HD premium fee would stay.
Darroch also said Sky “will take a look” at Tiscali, the Italian and UKbroadband service that’s up for sale, and which has set May 5 as thedeadline for bids.
BSkyB’s DTH subs grew 56,000 in the broadcaster’s third quarter, with43,000 new HDTV subscribers and an impressive 3.39m Sky+ PVR users (up262,000, and now 35% of Sky’s customer base). Even better progress wasrecorded in terms of broadband connections, up 229,000 to 1.4m andsigning up an additional 180,000 telephony connections to a new totalof 1.09m.
This was all good news, and there was plenty more, but the bottom lineresult for Sky was a third-quarter loss of £6m ($11.8m) which is a hugeswing from last year’s (same period) profit of £152m. The reason wasthe further writing down of the value of Sky’s 17.9% stake in ITV, andrecognising the plummeting fall in ITV’s share price, which meant animpairment charge of £131m in Sky’s books – and the commensurate affectonto the bottom line.
“This is the peak of our investment in broadband and the businessfinancially is performing bang in line with expectations. So prettymuch across the board I think it was a good set of results,” said CEOJeremy Darroch. “We took a decision 12 months ago to focus very much onthe quality of new customers. And that's meant that we havedramatically reduced the level of viewing package discounts that weoffer today versus a year ago. Now all of that meant that gross addswere down a little bit versus the same period last year, but ourconversion rate was much better. Churn is now at a three-year low and,as a consequence, we're growing in line with our targets, and that'sreally the number that we focus on.”
Darroch stressed that Sky was on target to hit its 10m DTH subscribertarget by 2010, and improve ARPU beyond today’s £424, up seven percent. Churn was up slightly since the December quarter, to 10.5%. Ingeneral Sky is toughening up its entry and credit qualifications fornew subs in an attempt to cut churn. Moreover, as Sky’s clients takemultiple products the likelihood to churn out is reduced. In fact nineper cent of Sky’s customer base are now “triple play” clients, takingTV, broadband and telephony. This is a modest amount, but it is only 16months into its availability, and might be considered a remarkableachievement.
Other key elements of Darroch’s conference call were:
• Sky will unbundled its Broadband and Telephony offerings over this next year
• There’s fresh thinking in the pipeline for Sky’s multiroom offer
• ARPU will continue to grow “pretty consistently”
• Sky HD is further ahead than Sky+ at the same time in its life cycle
• Amstrad ownership has brought average box prices down £7.
• Sky will consider acquisitions “that would accelerate our strategy”.