BSkyB Adds Subs, Strikes Sony Pictures Deal as Earnings Beat Expectations

11:19 PM PST 01/30/2013 by Georg Szalai
Courtesy of BSkyB

UPDATED: The multi-year Sony deal will further strengthen the film offerings of the U.K. pay TV giant, of which News Corp. owns 39 percent, amid the growth of Netflix and LoveFilm.

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

The company also said it has signed a new multi-year movie deal with Sony Pictures Television that will allow it to show new releases exclusively in the U.K. and Ireland in the first pay TV window for at least a year. Financial terms weren't disclosed. It is BSkyB's latest big film deal after similar arrangements with Warner Bros. and Universal Pictures designed to strengthen its movie offers, as Netflix and Amazon.com's LoveFilm continue to grow their subscriber base.

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The satellite TV company, of which Rupert Murdoch's News Corp. owns a 39 percent stake, signed up 25,000 new TV subscribers in its fiscal second quarter ending Dec. 31, compared with 40,000 in the same period of 2011, with analysts' expectations coming in at 25,000-30,000. But it also added 25,000 subscribers to its new Internet TV service Now TV, which it hopes will boost its overall customer reach as subscriber growth has matured and slowed.

BSkyB also added 132,000 broadband users in the quarter, down from 160,000 in the year-ago period, but ahead of expectations. That brought its total broadband user base to about 4.24 million, making it the third-largest broadband provider in the U.K.

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BSkyB said it added 88,000 total new customers in its fiscal second quarter, down from 100,000 in the year-ago period, but ahead of most analysts' expectations given that the company raised prices for the first time in two years. It ended 2012 with 10.36 million TV customers. Total subscribers rose to 10.74 million.

The company's adjusted first-half operating profit amounted to $1.02 billion (£647 million), up 8 percent from the year-ago period and ahead of analysts' expectations. Revenue increased 5 percent to $5.58 billion (£3.53 billion).

“We have delivered another good performance in the first half with strong progress across the board," said CEO Jeremy Darroch. "In what remains a tough consumer environment, our broadly-based growth strategy is working well."

He added: "Although we expect the consumer environment in 2013 to remain challenging, we have a strong set of plans for the year ahead. We will keep getting better on screen, further improve our products and services for customers and maintain our focus on efficiency. The business is in good shape to continue to deliver for customers and shareholders."

UBS analyst Polo Tang, who has a "neutral" rating on the company, predicted a positive day for BSkyB's stock. "BSkyB shares have re-rated [going into the earnings report], but we expect them to move higher today," he said.

Under the terms of the multi-year Sony film agreement, BSkyB's Sky Movies will be the first subscription service in the U.K. and Ireland to get new movies from Sony Pictures, including such films as Men in Black 3, The Amazing Spider-Man and Django Unchained and upcoming titles such as Smurfs 2, This is the End and After Earth. Sky Movies subscribers will get access to such new releases around six months after they have ended their theatrical run. The titles will then be exclusively available in the U.K. and Ireland on Sky Movies for at least a year before they screen on other TV channels or subscription services.
 
In addition to new releases, the deal also covers library titles, such as the first three Spider-Man movies, The Da Vinci Code and Bad Santa.

Said Ian Lewis, director of Sky Movies: "We’re delighted to have secured Sony Pictures content for our customers, further extending our leadership in movies. We are committed to providing our customers with the biggest and best movies, available to watch when and how they want."

BSkyB on Thursday morning also announced that Tom Mockridge, who recently quit his post as CEO of News Corp.'s News International newspaper unit in the U.K., has resigned from its board. News Corp. deputy chairman and COO Chase Carey has been appointed to fill his board spot.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai

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