BSkyB Adds 30,000 TV Subs in Latest Quarter

BSkyB CEO Jeremy Darroch Headshot - P 2012
Courtesy of BSkyB

BSkyB CEO Jeremy Darroch Headshot - P 2012

UPDATED: The U.K. pay TV giant, of which News Corp. owns 39 percent, grew its financials for the nine-month period and exceeded the 30 million paid products mark.

LONDON -- U.K. pay TV giant BSkyB on Thursday reported improved financials for the nine months ending March 31, as it continued to grow its pay TV subscriber base.

The company, in which Rupert Murdoch's News Corp. owns a 39 percent stake, ended March with nearly 10.39 million TV subscribers, up 30,000 in the quarter, double the subscriber growth that it had recorded in the year-ago period. However, the additions came from its traditional pay TV offering and online-only video service Now TV, which the company launched last year. It didn't break out how many subs each service added.

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Some analysts have predicted that BSkyB could start reporting flat traditional pay TV subscriber trends or even post its first-ever sub decline amid a more mature market similar to the U.S., but company executives said on an earnings call that BSkyB had seen unspecified traditional pay TV sub growth in the latest quarter, while the bulk of TV subscriber adds came from Now TV. In the U.S., pay TV sub growth has been minimal with cable TV operators losing subs, and satellite and telecom providers adding users.

BSkyB's TV subscribers also grew by 120,000 over the past year. Its total number of paid-for subscription products exceeded 30 million for the first time in the latest quarter, hitting 30.23 million at the end of March. BSkyB added 70,000 net new retail customers in the quarter to reach 10.81 million total retail customers.

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BSkyB increased its broadband user base by 152,000 to 4.4 million, while mobile TV service Sky Go Extra signed up 44,000 subscribers.

The company also reported a 460 percent increase in on-demand downloads, bringing the average number of weekly downloads to 4.5 million in the first three months of the year. BSkyB also touted a 37 percent increase in quarterly movie rentals compared to the year-ago period. Rentals are now regularly over one million every month, it said. Skyfall recently set a record of 400,000 rentals, with Argo and Taken 2 also performing strongly, CEO Jeremy Darroch said on an earnings conference call.

A recently launched Sky Movies Disney channels attracted almost 700,000 views over Easter weekend, he added.

BSkyB's adjusted operating profit for the nine months reached $1.55 billion (£994 million), up nine percent from the year-ago period. After-tax earnings came in at $1.1 billion (£710 million). Earnings per share came in at 68 cents (43.7 pence), up 16 percent. Revenue rose six percent to $8.37 billion (£5.38 billion).

BSkyB also said Thursday that it has extended its TV rights for the US Open tennis tournament and ATP World Tour for another five years. It has been in a sports rights showdown with telecom giant BT, which is launching its own sports networks later this year.

"We have had a good third quarter and our multi-product strategy is delivering strong results," said Darroch. "Increased take-up across our product set led to another improvement in financial performance with growth in revenues and profits accelerating in the third quarter."

He added: "Despite the tough consumer environment, we added 715,000 more subscription products in three months, taking the total past 30 million for the first time. On the back of this growth, we are creating 550 new jobs to meet demand for our products and serve our growing customer base."

On the call, he was asked about economic and competitive pressures. Darroch said that the economic and consumer environments remain "challenging," which led to an increase in customer churn in the latest quarter. While "we take all competition very seriously," the economy is "the predominant head wind we see," he explained. "There is no evidence of customers moving to Virgin [Media] or anywhere else."

Asked if BSkyB would focus more on growing its transactions business, such as single movie rentals, over subscriptions, Darroch said he wants to keep growing sub and pay-as-you-go services.

Is Now TV eating into traditional pay TV subs? "We're not seeing cannibalization," Darroch said. He said that Now TV users tend to be younger, single and more urban people who come to BSkyB from "all other places."

Asked if BT bid for the tennis rights against BSkyB, Darroch said he couldn't comment on that. "We got a very clear view of what are the rights we want to renew or acquire," he emphasized. How does he feel about the competition from BT? Given the breadth of Sky Sports' programming, "it looks in really good shape," Darroch said.

Twitter: @georgszalai