Originally Posted by
1andrew1:
“Interesting article here from the FT Lex column. Points out that Sky's revenues are rising but its profits decreasing, due to increased costs in content and marketing. Its average revenue per customer per annum has also decreased by £10. In essence, seems to suggest that Sky is still a strong performer but that its profitability may have peaked. Looking into the future, if BT spends heavily on marketing it will be forced to raise its investment here too and the costs of the Champions League will certainly rise; they have not done so since 2008.
http://www.euro2day.gr/ftcom_en/arti...-or-treat.html”
Originally Posted by samburrows:
“I think you're both highlighting an incredibly important point. I - and many others I know - are currently enjoying 12 months free broadband from Sky for resigning up with Sky Sports in August. I'm sure it's had the desired effect in holding broadband churn back, but at what financial cost? A loss of £10 ARPU is significant, and would look like a direct cost correlation to increasingly generous retention deals. How long can they keep this up for? Is their strategy to try and ride out the next couple of years and hope that the BT Board blinks first?”
The £10 reduction in ARPU is entirely because of the effect of the O2 broadband customers acquired in the previous quarter - most of whom don't have TV.
Bringing in a significant chunk of people who don't have TV means overall average ARPU is bound to fall - because broadband ARPU is massively lower than TV ARPU.
Without the effect of the O2 broadband customers, ARPU would be precisely unchanged at £569 (after allowing for ESPN cessation).
See table on page 8 of link below.
Revenues in the quarter are actually strong - up 7%. Adjusted operating profit is down because of:
1) The new PL contract
2) Extra investment of £70m this year in connected TVs - ie the small boxes to connect TVs to the internet - 642,000 connected in the quarter
Sky would argue that:
1) Only happens every 3 years - ie next year and the year after PL costs are flat
2) Is a one-off additional cost this year
..... and therefore that as long as revenues keep growing that profits will also grow again next year and the year after.
However I do think these numbers beg a big question about the CL auction - ie does Sky really want to spend what would be required to win 100% of CL rights (as discussed on the other thread) - ie that would mean another massive cost rise in 2015/16 before the likelihood of another PL cost rise in 2016/17.
ie They've only got one year of guaranteed flat content costs (ie 2014/15) - they must be expecting a significant CL cost rise in 2015/16 even if they just retain existing rights - though increase not remotely on PL scale.
http://corporate.sky.com/documents/p...ss_release.pdf