Sky Has "Grown Faster" Than "Complementary" Netflix, CEO Says

Courtesy of BSkyB
Sky CEO Jeremy Darroch

Jeremy Darroch also discusses possible international expansion by the European pay TV giant, its Hollywood studio deal plans and answers a question about a possible Brexit.

The CEO of pan-European pay TV giant Sky on Thursday called Netflix's service "complementary" to the company's offerings and touted Sky's faster financial growth in recent years compared to the streaming video provider.

Jeremy Darroch also discussed Hollywood studio deals and was asked about a possible Brexit on a conference call after Sky, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, reported higher nine-month earnings and continued subscriber growth in the fiscal third quarter.

"We have actually grown faster than they have," Darroch said when asked about Netflix. “This is not to decry what they have done, because I think they have done very well. But we have added more revenue over the last 3-4 years than Netflix’s international business. If you go over a longer period, a five-year period, we have added more revenue and substantially more profit than Netflix’s total business."

Comparing the two companies, Darroch said: "They have done very, very well. They have taken effectively what we would describe as a reasonably thin offering across many markets. ... It’s quite a different offering to what we do, for example, where we’re very deep in the market."

What does this mean for the competition between the two companies and their offerings? “They are highly complementary services," said the Sky CEO. "Many of our customers take Netflix today. It complements Sky very, very well. So, I think sometimes when people characterize them as sort of being at odds, it’s actually a mistake.”

Asked for his take on Netflix's reduction in its international subscriber growth guidance earlier this week, Darroch said: “When you are going into a lot of these [foreign] markets, none of them are particularly easy. When you start to take on that amount of broad change, how you execute on the ground obviously becomes more challenging."

With management having previously signaled it could take Sky services to new markets beyond its current markets of Britain, Ireland, Italy, Germany and Austria, the CEO said: "We think about that in places if we go somewhere else." He said the company has so far mostly chosen to grow "by very much focusing on the markets that we are in," adding: "Over time, we [might] go elsewhere. But we will go into those with our eyes open, because none of these things are particularly easy.”

He once again mentioned Sky's OTT service Now TV as one business with growth potential abroad. “Over time, that will give us options to take that further," Darroch said. Sky remains open to entering new markets over time, but emphasized the company won’t let that “blindside us to the very considerable opportunity that we got in the markets we are in today.”

Discussing Sky's recent investment in Southeast Asian streaming service iFlix, Darroch said "that’s a good example" for making a move into international markets. “Asia is not a business that is a priority for us to put our own operational [foot] down, and that’s a good way that we can get exposure to that region,” he explained.

Sky recently struck a pan-European movie output deal with Sony, its first since combining the three Sky platforms in a deal with Fox. “There are advantages where we can put one deal in place and have a consistent set of rights and actually have one overall negotiation, which just makes it more efficient," Darroch said about the benefits of such deals on Thursday. "But I think that will not be appropriate for every renewal that we have. Certainly, some of the [players and deals] have quite different positions by market. So I think we will sort of pick and choose according to what that is. But to the extent to which our partners are keen to have one overall contract that covers the Skys, one set of negotiation, we will actually engage with them.”

With Sony “we had quite different positions across the Skys,” he explained. So it is “a great example for how we can draw that together and we can put together an overall contract that works really well for us and works really well for Sony as well. Of course, the opportunity for both of our businesses now is … finding ways we can take it forward. They can be anchored by the contract, they can hopefully invest more in their content and then we can exploit it well for them.”

Darroch also got a question about a possible Brexit, meaning Britain's possible exit from the EU. “We see a huge opportunity for us across Europe," the Sky CEO said and emphasized the company would pursue it no matter what happens.

But Darroch also said that Sky news network Sky News must remain "entirely impartial," so the company can't come out publicly on any side of the topic. “We are not adopting a political position on that," the CEO said. "It’s for people to decide."