Amid the controversy surrounding News Corporation, which has for the moment abandoned its bid to take control of British Sky Broadcasting, Sky delivered a strong set of annual results. Sky revealed revenues of approaching £6.6 billion and an operating profit of over a billion pounds, up 23% after adjusting for exceptional items the previous year. Sky is showing rapid growth in broadband, adding over 700,000 homes in the last year. Some 800,000 homes have connected their Sky+ HD satellite receivers to broadband since the full launch of Sky Anytime+ in April. That represents over 20% of the 3.8 million Sky+ HD homes, which in turn account for over 37% of the Sky subscriber base of nearly 10.2 million homes in the United Kingdom and Republic of Ireland.
Sky Anytime+ is currently only available to those with a Sky+ HD box and Sky Broadband. Sky now has 3.3 million broadband subscribers, a third of its customer base, up from 2.6 million the previous year. Some 2.8 million of its customers now take a combined package of television, broadband and telephony services.
In a matter of months, Sky Anytime+ has already overtaken the number of users that BT Vision has acquired in over four years. With initial ambitions to reach millions of homes, BT Vision is only in around 600,000, from a retail broadband base of 5.7 million.
Sky Anytime+ provides online access to movies, and “box sets” of entertainment programmes, documentaries and kids shows, available on demand over Sky Broadband. This addresses the main limitation of satellite distribution, which does not otherwise support video on demand. It supplements the existing Sky Anytime offering, which broadcasts a selection of programmes that are stored on a reserved partition of the hard drive in a Sky+ HD box.
The Sky programme guide remains functional but primitive in comparison to some competitive offerings. Nevertheless, it seems that a significant number of Sky subscribers welcome online access to programming on demand. Increasingly, Sky is extending its coverage beyond the set-top box, where there is more scope for user experience innovation.
The recent launch of Sky Go now allows all Sky subscribers to watch Sky programming on multiple devices at no extra cost. This brings together the previously separately branded Sky Player online and Sky Mobile services. Supported devices include Microsoft Windows and Apple Mac personal computers, Microsoft Xbox 360 games consoles and Apple iPad, iPhone and iPod Touch applications, with support for Android devices planned. Only two devices can be registered by a subscriber at the same time, which seems rather limiting.
Sky still does not offer on-demand access to programmes from the BBC, which retains them exclusively for its own iPlayer brand, refusing to allow its programmes to be aggregated within other services.
The BBC made an exception for the Virgin Media cable platform, but users of the latest TiVo service bizarrely have to go through the Apps and Games menu to reach an iPlayer application to watch BBC programmes on demand.
Sky demonstrates the value of a subscription business based not only on premium programming but also on delivering broader communications services. Sky now even provides broadband and telephony independently of its television packages, with over 100,000 standalone communications customers. It sees this as an area for further growth, with margins that are in some cases higher than from television.
Premier League football coverage remains a defining feature of the Sky Sports package, but despite record audiences, up 11% on the previous year, each match is still only watched by an average of 1.4 million viewers, which is about the number that watch a repeat of The Simpsons on Channel 4.
There was no news about how many people are actually watching in 3D, which suggests not many, although Sky remains committed to its stereoscopic coverage. Sky is continuing to invest in 3D, forming a new production company, Colossus, to develop original programming.
Advertising revenue is less important to Sky, although of course it still funds many of the channels that people watch on its platform. Nevertheless, with the acquisition of Sky Living, its advertising revenue is up 35% to £458 million, including online. Sky now accounts for around 20% of the share of the television advertising sector in the United Kingdom. Sky is also a major advertiser, spending over £1.2 billion a year on marketing, although that includes subscriber acquisition costs including set-top box subsidies.
The strength of Sky is that is not dependent upon any one hero product, service or revenue stream, but on an increasingly varied mix of programming and communications. The secret of pay television, as informitv has often observed, is that people do not simply pay for premium programming; they pay for a combination of choice, convenience and control.