More than six out of ten Sky customers now have a Sky+ digital video recorder. Nearly six million homes have Sky+, mainly boosted by the adoption of high-definition, which is now viewed in 1.6 million Sky homes in the United Kingdom and Ireland. With over 9.5 million television homes, Sky is moving closer to its target of ten million and extending beyond broadcast to become a general provider of digital communications and media entertainment services.
The number of Sky+HD customers has more than doubled over the last year, adding over a quarter of a million in the last three months. Many of these may have been existing customers taking advantage of heavily subsidised high definition set-top boxes.
Jeremy Darroch, the chief executive, told analysts it had been “another strong quarter with strong operational metrics in a challenging consumer environment”.
It seems that the economic recession has done little to dampen consumer demand for pay-television.
In all, Sky signed up 362,000 subscribers to its satellite service, but lost over a quarter of a million, leaving 94,000 net additions, a higher number than in the same period in recent years. With the acceleration in growth, the rate of churn crept back up to 11.3%, reflecting the economic climate, tougher credit control, an increase in pricing, and following a routine swap out of viewing cards.
Sky now takes an average of £469 per year from each subscriber, an increase of over £80 over the last three years.
The result has been a 15% increase in subscription revenues, and despite increased costs an operating profit up 11% to £198 million for the last quarter.
With over two million customers also taking broadband and almost two million taking telephony services from Sky, nearly one in six customers now subscribe both these services as well as television, choosing Sky as a general communications and entertainment provider. This still leaves plenty of headroom for further growth.
Sky is planning to launch a video on demand service early in 2010, delivered over broadband to its existing Sky+HD set-top boxes, using on a similar progressive download model to that already used by its Sky Player service for personal computers.
Sky is also going beyond the traditional set-top box, and will make its television and video services available on the independent Fetch TV service from IP Vision, as well as on Microsoft Xbox Live and with Sky Player preloaded as part of Windows Media Centre in the latest version of the Microsoft operating system.
Also launched this week is Sky Songs, combining features similar to iTunes and Spotify, at an attractive price point. It offers a library of over four million tracks available for download in unprotected MP3 format and unlimited streaming on a subscription from £6.49 a month.
Expected to launch in the back end of 2010 will be a 3D television service. Sky said it is shooting material already but is working through the commercial plan, although it indicated this might be on a pay-per-view model.
Sky continues to impress with its innovation combined with a relentless focus on the business bottom line.
Sky also invests heavily in promotion, spending £245 million on marketing in the last quarter. That is getting on for a billion pounds a year, which includes the cost of set-top box subsidy.
While Sky has its detractors that would like to see more restrictions placed upon it, the reality is that it is a well run business that has consistently taken risks and placed big bets on innovation in order to establish and maintain its dominant position in one of the most competitive digital television markets in the world.