BSkyB: More revenue, more subscribers, lower profits

BSkyB revealed today that revenue is still growing at a decent lick, in spite of increased competition from the likes of BT and Netflix. However, profits have fallen thanks to increased investment spending.

Revenue rose by 6.6% to £5.7bn in the nine months to 31 March, but profits fell by 8.5% to £910m.

Sky has spent heavily to persuade more customers to connect their satellite boxes to the internet, with over 50% now wired up. The company hopes this will translate into a higher take-up of its on-demand products, such as its ‘Sky Store’ and ‘Box Set’ services, profiting from the popularity of series such as ‘Game of Thrones’.

The move to web-connected boxes should also help Sky compete with web content players such as Netflix and Amazon. Chief executive Jeremy Darroch remains upbeat, saying “connected customers are watching more TV, they’re more loyal, and they’re more likely to recommend Sky”.

Sky added 74,000 net new TV customers in the third quarter, double the growth for the same period last year. However, it is unclear how many of those are traditional satellite customers, tied in to long contracts, and how many are signed up to its cheaper ‘Now TV’ service. Sky also said it has struck a deal with Sony to make its Sky Go and Now TV services available on Playstation devices from the summer.

On the downside, broadband growth was disappointing. Only 70,000 extra broadband subscribers were added in the quarter compared to 152,000 a year earlier. That’s a sign that BT’s offer of free football to broadband subscribers may be working – the main rationale for BT’s move into football was to retain more broadband customers.

Overall, today’s results were pretty impressive. It’s no mean feat to gain new customers when competition is increasing. So we’re not surprised to see the share price rise 4% this morning.

Phil Oakley said back in 2012 that the company is ‘confounding the sceptics’. It looks like that will continue.

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