SATELLITE broadcaster BSkyB said yesterday that it was on track to meet its target of signing up eight million satellite customers by the end of 2005.
It unveiled a much-better-than-expected Christmas trading quarter, with sharp rises in subscribers and underlying profits. James Murdoch, the group chief executive, revealed that Britain’s biggest pay-TV group had added 192,000 new customers in the t
hree months to end-December.
This was far more than the City had expected and compared with 62,000 new subscribers in the previous three months to end-September. Analysts had expected growth this time of up to 180,000.
Operating profit before exceptional items jumped 25 per cent to £354 million, while Murdoch, son of BSkyB chairman Rupert Murdoch, said the gains were not at the expense of profit margins. The latter jumped from 16 to 18 per cent in the quarter, for which the dividend rises 45 per cent to 4p, and Sky’s chief financial officer, Jeremy Darroch, said further margin progress was likely.
Darroch said: "We are confident operating margins will continue to grow over time."
Sky said it had spent £258m on marketing its offerings in the first half of its trading year, which was up 20 per cent on a year ago, and that the pace of marketing growth was to accelerate. Sky said above-the-line marketing, such as TV advertising, would increase 40-50 per cent for the full year.
Murdoch also said the "churn rate", the percentage of subscribers who ditched Sky in the quarter, fell 0.3 points to 9.5 per cent, "well within our 10 per cent target".
He also said that the company was sticking to its forecasts of eight million customers, compared to the current 7.6 million, by the end of 2005, and ten million by 2010.
Murdoch, whose father’s News Corporation owns 35.4 per cent of Sky, said the company believed it could attain these goals despite the growing challenge of the subscription-free terrestrial digital service Freeview.
However, he acknowledged: "Free digital TV will be ubiquitous over time. Switch-off will occur." But Murdoch added: "A customer who goes out and buys a Freeview box today is less likely to decide they want Sky today as well, but we’re confident they will over time.
"We also think Freeview is giving people a taste of multichannel TV, that it’s a catalyst for pay-TV."
Pre-tax profit on ordinary activities was £330m and revenue rose 10 per cent to £1.95 billion in the first half.
Annualised average revenue per user was £386 in the second quarter, up £9 from the first quarter. The company said the total number of households taking its Sky Plus service, which allows customers to pause live TV and record one satellite programme while viewing another, increased by a record 168,000 in the quarter to 642,000, representing 8.4 per cent of its total subscribers.
It said the growth in Sky Plus customers had also led to further good growth in the number of households taking two or more subscriptions, with the total number of so-called multi-room households increasing by 116,000 in the quarter to 473,000, accounting for 6.2 per cent of total subscribers.
Live sports events such as Liverpool’s match against Chelsea, the film premiere of Bruce Almighty and Sky News enabled Sky to win a higher viewing share in all TV households than Channel Four for a full week for the first time.
Sky’s shares closed up 3.5p at 575p.
News Corp boostRUPERT Murdoch’s News Corp has posted a higher quarterly profit, boosted by strong DVD sales of the film Day After Tomorrow and advertising sales at its cable networks.
The firm which owns the Times and the 20th Century Fox film studio, posted a net profit of $386 million (£205m), against $215m last year. Revenue rose 18 per cent to $5.6 billion. Sales of The Star Wars Trilogy and I, Robot boosted operating income of the movies division by 57 per cent.
"Overall, I’m surprised at how strong film was," said Peter Mirsky, an analyst at Oppenheimer. "But the two key areas of concern are the Fox Broadcasting network and Sky Italia."
Analysts said Murdoch, whose company also controls DirecTV Group in the United States, is gearing up to gain market share at the expense of profits.
"It’s subscriber gains at pretty much all cost," said Paul Kim, an analyst at Tradition Asiel. "Investors may not like that."
The full article contains 801 words and appears in The Scotsman newspaper.
