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BSkyB gains customers but loses profits

Article By: ,  Financial Analyst
May 1, 2014 12:15 PM

Shares in BSkyB have risen this morning (May 1st) as thousands of new television customers offset a drop in profits.

The company announced that it had gained as many as 74,000 new customers to its pay-TV service in the third quarter of its financial year, more than twice the figure for the same period a year previously. In the nine months to the end of March, Sky enjoyed a total of 764,000 subscriptions.

Over the same period, revenue increased by 6.6 per cent to a total of £5.6 billion, with average annual revenue per user edging up by £4 from the previous year to a substantial £571. That was based on an impressive retail customer base of 11.4 million, including an increase of 90,000 over the last quarter.

“Our investment in connected TV services is delivering results,” said chief executive Jeremy Darroch. “Almost 50 per cent of Sky homes are now connected and this is transforming their viewing experience: connected customers are watching more TV, they’re more loyal and they’re more likely to recommend Sky.

“Our expanded Box Sets service has been particularly popular with a fourfold increase in viewing of top titles like 24 and Game of Thrones.”

Falling profits

Shareholders and investors have clearly been reassured by the growth in BSkyB’s customer base at a time when falling profits might have otherwise made them uneasy.

Higher programming costs contributed to an annual decline in pre-tax profits from £966 million to £793 for the nine months to March.

But the company believes this emphasis on investing in quality content is contributing to an increase in customers – popular shows such as Game of Thrones can only be watched legally in the UK when broadcast on Sky Atlantic.

In contrast, demand for Sky broadband services is slowing, with the company reporting the smallest number of new broadband customers in a single quarter since 2006. Competition from major providers such as BT is making it difficult for Sky to retain its market share.

Even so, the growth in TV customers left investors feeling positive and BSkyB stock jumped in early trade. As of 08.35 BST in London, shares had risen by just over four per cent.

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