Sky Earnings, Subscribers Rise in Second Report Since Euro Pay TV Deals

Courtesy of BSkyB
Sky CEO Jeremy Darroch

The pan-European pay TV giant, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, reports its strongest U.K. subscriber performance in 11 years.

Pan-European pay TV giant Sky on Tuesday reported stronger subscriber gains for its fiscal third quarter than in the year-ago period. 

Operating earnings for the nine months ended March 31 also rose, 20 percent, from the year-ago period to $1.5 billion (1.03 billion pounds). The company didn't report net earnings. Revenue for the nine months rose 5 percent to $12.6 billion (8.45 billion pounds).

It was the company's second report since closing a deal that combined 21st Century Fox's satellite TV operations in the U.K., Ireland, Italy, Germany and Austria.

The company, which is led by CEO Jeremy Darroch and in which Rupert Murdoch's Fox owns a 39 percent stake, signed up 242,000 new customers in the latest quarter, up almost 70 percent from the same period of 2013.

It lauded its strongest fiscal third-quarter subscriber growth rate in the U.K. and Ireland in 11 years, a record growth rate in Germany and Austria, as well as its best third-quarter performance in Italy in three years. The company's total subscriber base reached 25.08 million total customers at the end of March, up from 24.84 million at the end of December.

In the U.K., it signed up 127,000 new subscribers, including 94,000 pay TV subs, in the latest quarter, compared with 74,000 in the year-ago period. Sky recently announced it would raise its U.K. prices by 3.5 percent to 4 percent, earlier than it usually does amid its confidence in industry momentum in Britain.

Sky in November closed deals with Fox to acquire its pay TV platforms Sky Italia in Italy and Sky Deutschland in Germany. The company said it paid $10.87 billion in the deals with Fox and Sky Deutschland minority shareholders.

In February, in its first earnings report since the deals, Sky said it added 204,000 U.K. subscribers in the quarter ended in December, its biggest growth rate in nine years at the time. It also said then that Sky Deutschland added a record 214,000 subscribers in its fiscal second quarter, its biggest gain ever, while at Sky Italia, customer growth of 30,000 was the highest since the first quarter of 2012.

"We have delivered an excellent third quarter as customers across the enlarged Sky group respond to the quality and breadth of
what we offer," said Darroch. "The U.K. and Ireland delivered a stand-out performance, reporting both the highest customer growth and lowest churn for 11 years. We took share in broadband and grew strongly in TV as our dual-brand strategy with [online video service] Now TV and Sky continues to deliver."

Sky on Tuesday also touted its content momentum. "We had an outstanding quarter on screen with significant progress in our drive to increase the volume and quality of homegrown original content across the group," the firm said.

Darroch on a call lauded the company's increased range of content, including homegrown content. Sky will continue to look for content, such as shows, to acquire. Plus, it will continue to look for possible content company acquisitions, as it has bought some U.S. and U.K. production firms whose output it has leveraged via its program sales arm. "We’ll be open; we’ll be selective," Darroch said about possible further acquisitions.

Asked about the U.K. price increases and their effect on subscriber trends, the CEO said Sky has increased the value of its pay TV subscriptions over the past year. "We’ll see how that goes over the next few weeks," he said.

Darroch also reiterated that Sky would continue to spend more on content across its businesses. Most of its spend is currently in the U.K., but he said Germany and Italy will also see increases. Overall, he predicted "significant" content spending growth in the coming years.

Twitter: @georgszalai

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