BSkyB Quarterly Financials Rise, Subscriber Growth Slows

12:19 AM PST 11/01/2012 by Georg Szalai
Courtesy of BSkyB

UPDATED: The U.K. pay TV giant, in which Rupert Murdoch's News Corp. owns 39 percent, says the weak economy is a bigger challenge than Netflix.

LONDON - U.K. pay TV giant BSkyB on Thursday reported improved fiscal first-quarter financials, but slower subscriber gains than in the year-ago period.

The satellite TV firm, in which Rupert Murdoch's News Corp. owns a 39 percent stake, signed up 20,000 new TV subscribers in the latest quarter, compared with 26,000 in the same period of 2011. It ended September with more than 10.3 million pay TV users.

Asked if the popularity of streaming video providers Netflix and Amazon.com-owned LoveFilm are affecting subscriber growth, CEO Jeremy Darroch told an earnings conference call that "the biggest headwind today is the economy," which remains weak. He added that the pay TV space has always been competitive, and the assumption is that it is getting even more competitive. That is why BSkyB has been offering more ways for consumers to access its content, including mobile service Sky Go and recently launched stand-alone broadband streaming service Now TV.

BSkyB on Thursday didn't say how many monthly subscribers that service has attracted or how many single movies have been rented. But Darroch said Now TV has temporarily stopped its offer of single movies, which complements the subscription service, to improve the presentation of that part of the service.

Overall, management said it was too early to comment on how Now TV is doing, given that first TV ads only started appearing last week on X Factor as part of a $48 million (£30 million) advertising campaign.

The service will focus on its movie offers through the holiday season before launching a separate Sky sports service in the new year, followed by the launch of an online service for the BSkyB entertainment channels, Darroch said. The company has not detailed how the different content areas will be packaged on Now TV.

BSkyB on Thursday also reported that it added 102,000 broadband users in the quarter, down from 150,000 in the year-ago period. That brought its total user base to about 4.1 million, making it the third-largest broadband provider in the U.K.

Overall, BSkyB added a total of 48,000 new customers across its product portfolio, compared with 77,000 in the year-ago period.

The company's adjusted quarterly operating profit amounted to $500 million (£310 million), up 5 percent from the year-ago period. Revenue rose 4 percent to $2.77 billion (£1.72 billion).

"We have made a strong start to the year, delivering another good quarterly performance and continuing to position the business for the long term," said Darroch. "Whilst we continue to see a challenging consumer environment in the UK and Ireland, we are well positioned to execute our plans for the year.”

UBS analyst Polo Tang said BSkyB's latest financials were ahead of expectations. "Despite the first-quarter beat, we would not expect any significant change on full-year estimates," he said though. But after recent weakness in the stock, he said "we would expect the shares to nudge up on these results."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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