Challenges ahead for BSkyB
January 30, 2012
BSkyB unveils its Q2 numbers on January 31st, and most observers see continued progress for the broadcaster, although with net TV subscriber additions being somewhat less than this same time last year.
Investment banker Morgan Stanley forecasts net TV subs growing by 69,000 (140,000 this time last year). This slower growth might also affect HD additions, says the bank, and not helped by lower than expected sales of high-end TV sets ahead of Christmas. Nevertheless, Morgan Stanley expects about 150,000 net HD additions, which is up on the 103,000 of Q1 (to September 31st) but “well down” on the 343,000 achieved this time last year.
The bank also expects Multiroom additions to also have slowed down (some 30,000 vs. 61,000 last year). Churn is expected to be at about 10.2 per cent, which converts to a loss of 261,000 customers. This is worth focusing on, says the bank’s report. The numbers will be recognised by all Sky-watchers, given that a ‘lost’ 1 million customers a year need to be replaced before any growth can be achieved. “This is a tall order,” says the bank’s note.
But the bank praises Sky’s strategy in its ‘triple play’ proposition, pointing out that consumers can save real cash by signing up to the Sky bundle. Indeed, Sky is also beginning to tap into non-TV customers, and while the numbers are modest (51,000 added in Q1), these numbers will be keenly watched. With only 28 per cent of Sky customers taking the ‘triple play’ product, the outlook can only look positive for growth in this area.
The worries that the bank mentions include the now looming renewal of Sky’s various sports rights with the Premier League top of this list. The bank suggests these talks will start in March/April, and there may be fresh cash sloshing around from ESPN and Al Jazeera. The negotiations might be delayed because of the ‘Portsmouth landlady’ case, which is subject to a High Court ruling expected on February 24th.
Morgan Stanley is also concerned over further regulatory pressure on Sky’s exclusive Hollywood movie deals, as well as what this might mean for competitive pressures from the likes of Netflix, LOVEFiLM and other OTT suppliers.
Then there’s the upcoming launch (around June) of YouView, which is a grouping of the UK’s major network broadcasters coming together to over a ‘super Freeview’ product. It means a wealth of on-line programming available to anyone with a 2Mb/s broadband link, and no subscription. Because of delays to YouView’s launch, Sky has enjoyed plenty of time to prepare for its introduction. Only time will tell how it responds.