LONDON — As anticipated, British Sky Broadcasting has posted a significant fall in its profit margin, with pre-tax profits down 16% to £271 million ($442 million) for the year ending June 30. In contrast, sales were up 15% to $2.24 billion.
The drop in profits is attributable to both the higher cost of Premier League soccer rights — $150 million more than in 1996-97 — and start-up investment in the satcaster’s digital platform, Sky Digital.
Advertising revenue grew an impressive 30% to $318 million, well above an estimate of 9% growth for television advertising in the U.K. overall. BSkyB estimates its share of the TV broadcasting market in Britain grew by more than 1% to 7.2% last year.
BSkyB subscriptions were up 527,000 to 6.9 million households, including 42,000 new homes in Ireland, where BSkyB has 555,000 subscribers. Subscriptions accounted for 83% of BSkyB’s total sales.
Even so, BSkyB disclosed “a slight reduction” in movie channel subscriptions. BSkyB is aggressively trying to maintain its strong position in movie programming in the face of growing competition. In September, the company is relaunching its three analogue movie channels. BSkyB is also investing in producing its own movies.
Revenue from direct-to-home (DTH) subscription was up 12% to $1.58 billion, representing 67% of total sales. Revenue from cable subscriptions, however, rose 19% to $372 million, and of new BSkyB subscribers, only 16,000 opted for a dish instead of cable.
As well, BSkyB’s churn — the amount of customers who took BSkyB and then later canceled the service — hit 15.1%, up from 12.2% last year.
BSkyB has said it expects that Sky Digital — due to launch Oct. 1 — will boost subscriptions, in particular DTH take-up. But the current trend is toward cable subscription, increasingly positioning BSkyB as more of a programmer and less of a distributor.
To that end, the satcaster has announced two more TV channels exclusive to the 200-channel Sky Digital platform, Living and UK Arena. The analogue version of Living has seen its ratings soar on the back of the popularity of “Jerry Springer.”
Sky Digital expects to have as many as 20 exclusive channels, programming denied to Ondigital, the 15-channel digital terrestrial network co-owned by Granada Group and Carlton Communications and skedded to bow in November.
Finally, BSkyB has outlined how much Sky Digital will cost consumers. The big basic “family package” of channels is priced at $19.50 per month, smaller “focused” packages will be available for $14.60, and a “special value tier” will be available for $11.40.