Sky reported a strong set of annual results and is within reach of its long-term target of ten million satellite television subscribers in the United Kingdom and Ireland by the end of the year. Each customer now spends an average of over £500 a year on Sky, with their subscription revenue alone set to overtake the total income of the BBC. Virgin Media is strengthening its position, but BT Vision recorded its lowest increase in subscribers, adding just over a thousand a week, and is yet to reach half a million homes.

Sky annual revenues are up 10% at £5,912 million, with an adjusted operating profit rising correspondingly to £855 million. Sky subscription revenues alone at £4,761 million are approaching the total £4,790 million income of the BBC, of which £3,446 million is provided by the £ 145.50 licence fee.

Demonstrating that pay-television is relatively resistant to recession, Sky added 90,000 subscribers in the last quarter to reach 9.86 million. That includes 429,000 net additions for Sky+HD, which is now provided as standard and is in nearly 3 million homes, or 30% of the Sky installed base. There is still plenty of room for growth. This year the ownership of HD TV sets is expected to exceed standard definition homes and the number of high-definition channels available on Sky is increasing.

Chief executive Jeremy Darroch said customers are choosing Sky in ever greater numbers. “High definition goes from strength to strength, with more than twice as many customers as a year ago. At the same time, customers are choosing broader bundles of services, with one in five now taking all three of TV, broadband and telephony. Overall, customers are taking 45% more additional subscription products than a year ago.”

News Corp has indicated that it could be interested in buying the 61% of BSkyB that it does not already own. It has made an informal offer of 700 pence a share, valuing the company at £12.6 billion, but the independent directors are holding out for more.

The recent acquisition of the Virgin Media Television channels, the announcement of an exclusive partnership with Home Box Office, the launch of 3D TV to residential customers and video-on-demand delivered over broadband will further strengthen the Sky programming proposition.

Sky has signed a multi-year output deal with HBO that will see all their new programmes available exclusively on Sky channels in the United Kingdom and Ireland, with a library of classic shows to be available on-demand.

October will see the consumer launch of Sky 3D, beginning with live coverage of the Ryder Cup golf and Premier League football, with a number of movies in the run up to Christmas. Sky 3D will be available free of charge to subscribers on premium packages using their existing Sky+HD box, although they will require a new 3D compatible display, now available from Sony, Samsung, LG or Panasonic.

Virgin Media added 26,000 digital television subscribers in the last quarter, up 185,000 over the last year to 3.7 million. Virgin Media is slowly improving the prospects for the cable television service, recognising the value of broadband as its primary product. As a sign of confidence, Virgin Media is proposing to buy back £375 million of its shares as part of £700 million capital return programme that will also pay down debt, although it still owes £5.8billion in long-term debt.

Virgin Media has launched a trial of its equivalent to TV Everywhere, simply known as Virgin Media Player. Subscribers to the top tier package can access video on demand through a web browser. Later this year, Virgin Media plans to start rolling out a new set-top box developed in partnership with TiVo.

BT Vision has seen little growth, adding only 14,000 new subscribers in the last three months, up just 48,000 on a year previously, to reach 481,000 homes after being marketed for over three years. Sky has to sign up twice that many customers a year, on average one every couple of minutes, just to offset its 10% customer churn.

The BT Vision figure represents fewer than 8% of their broadband retail customers, an addressable market of 6.2 million homes. At its current rate of growth BT Vision would take another nine years to reach a million homes. It may accelerate now there is a level playing field for wholesale access to Sky Sports channels, but that means there is no longer any excuse for such poor performance.

TalkTalk added 34,000 new broadband customers in the last quarter, taking the total to 4.23 million. The company does not break out figures for its TalkTalk TV service, inherited from Tiscali, which acquired it from VideoNetworks. Based on previous figures, informitv estimates the service to be in fewer than 50,000 homes, until we hear otherwise. TalkTalk is instead talking up its involvement in Project Canvas.

The lesson from Sky is that it takes a considerable commitment and an enormous investment to make a success of pay-television in the United Kingdom, but once critical mass is achieved the rewards can be significant. Sky is exceptional, however, and while the outlook for Virgin Media seems more positive, BT and TalkTalk have made little impression in the market. It is still an open question whether Project Canvas, or YouView as it may be called, will enable them to take more share from Freeview and Freesat homes, or whether they will continue to compete with Sky and Virgin Media for broadband customers.