BSkyB Posts Better-Than-Expected Results

BSkyB CEO Jeremy Darroch Headshot - P 2012
Courtesy of BSkyB

BSkyB CEO Jeremy Darroch Headshot - P 2012

UPDATED: The U.K. pay TV giant also announces a five-year exclusive deal with HBO, while playing down the impact of aggressive competition for customers with sports rights rival BT.

LONDON – U.K. pay TV giant BSkyB reported better-than-expected first-half operating profit, after posting an increasing number of HD TV services and more on-demand movies and box sets during the 2013 holiday season.

The company, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, posted operating profit for the six months ending in December of $985 million (£595 million), down 8 percent, on revenue up 7.6 percent to $6.2 billion (£3.75 billion) -- broadly in line with expectations.

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BSkyB took the opportunity to play down any impact of the aggressive competition from rival telecoms, BT and TalkTalk, in the sports rights arena, while announcing a new five-year deal for the exclusive rights to the entire HBO TV catalog, which includes U.S. shows such as Girls and Game of Thrones, in a move to display its promise as a home for a "wide audience" rather than just sports fans -- and, in particular, Premier league soccer fans.

Chief executive Jeremy Darroch said: "In a consumer environment that remains challenging, customers continued to choose to take Sky products in ever greater numbers in the run-up to Christmas, with second quarter growth up by over 40 percent on last year."

Subscribers took 873,000 new products, such as HD TV and broadband, in the second quarter, which includes Christmas, beating market expectations of 731,000 total product additions.

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The deal with HBO, which The Guardian is reporting as being worth as much as $455.6 million (£275 million) over five years – a figure Darroch declined to comment on during a conference call with the media on Thursday – will make Sky Atlantic the exclusive destination for HBO output in the U.K. until 2020.

Analysts were expecting operating profit of $971 million (£586 million) on revenue of $6.23 billion (£3.76 billion), according to a company-supplied consensus of eight analysts.

Darroch also noted a boost to its interim dividend by 9.1 percent to $0.19 cents (£0.12) a share.

Despite all the talk of HBO deals, increases in subscribers and growth for its other services, BSkyB posted an 18 percent fall in pre-tax profits to $873 million (£527 million) in the six months to Dec. 31, 2013.

Darroch said 2013 represented a year of "continuing investment" for the satellite giant, with cash being poured into fresh digital services and increased Premier League soccer rights costs as the battle with BT Sport ramped up.

Darroch played down BT's deep-pocketed and aggressive entry into the arena for rights to a variety of sports, offering subscriber numbers and viewers as an indication.

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He said Sky Sports, BSkyB's home for soccer, posted a six-year high.

"Our financial performance was strong in the first half and we remain on track for the full year," he said. "We are moving through a year of investment in which we are absorbing the one-off step-up in Premier League costs well."

The company added 77,000 TV subscribers in the quarter ending in December -- the broadcaster includes sign-ups to its Now TV online service in this figure -- taking its total TV customer base to 10.5 million.

Darroch said that made it the strongest quarter in three years.

Broadband subscribers, the ultimate goal in its scrap with BT Sport, grew by 110,000 to 5.1 million in the last three months of the year.

An early and clear indicator of negative impact on BSkyB from the competition for eyeballs would be a high churn rate -- subscribers joining and then cancelling their subscriptions -- for the service.

Churn was 10.8 percent across the six months to the end of December, up 0.5 percent over the same period last year.

The launch and take-up of BSkyB's premium paid-for service, Sky Go Extra, which allows customers to register up to four devices and download TV and movies to watch offline for $8 (£5) a month, posted 258,000 new subscribers in the final quarter, with subscriber numbers hitting 643,000 in total.

"We had a very good first six months of the year, as we reaped the benefits of our broader-based approach to growth," Darroch said.

The company said that usage of its on-demand services has tripled and the number of movie rentals through its Sky Store service doubled.