Sky has released its financial results for the last twelve months, and you can see why a bidding battle enraged over the UK’s biggest premium content provider.
Total revenues for the year stood at £13.6 billion, while operating profit was £1.034 billion, year-on-year increases of 5% and 7% respectively. Customers are clearly happy with the content platform, and the promise of more original programming over the next twelve months will only make this proposition more attractive.
“It’s been an exceptional year,” said CEO Jeremy Darroch. “We’ve delivered another set of strong results with like-for-like revenues up 5%, Established Business EBITDA up 11% and EPS up 10%. Over half a million new customers joined Sky this year and we now have 63 million products in customer’s homes as they continue to choose Sky over other providers. As a consequence, we have extended our leadership position as Europe’s largest direct-to-consumer media and entertainment business.”
In its largest market, the UK, revenues increased 4% to just over £8.9 billion, adding 270,000 new customers across the year. Churn on its TV product was down to the lowest point in a decade, while advertising revenues increased 6% despite claiming the market overall is relatively stagnant. Content is still by far and away the cash cow for Sky, though with the mobile unit adding another 95,000 customers in the final quarter, taking the total to more than 500,000, while fibre penetration of the broadband business is now up to 38%, the convergence strategy is clearly starting to take hold.
While this strategy might have been championed in the UK, it won’t be too long before it starts making an impact elsewhere. A partnership with Open Fiber in Italy will grant access Fibre-to-the-Home (FTTH) network and allowing the launch of a triple-play service from Summer 2019, while there are also plans to kick-off a GB fibre offensive in Ireland.
That said, Sky might be looking to diversify into new streams, but it is putting into practise a lesson many telcos could learn with learning; its nailing the traditional business first. Many telcos might have forgotten about connectivity in the search for profits elsewhere, but Sky is continuing to bolster its content platform. Keep the customers happy with your core service and build everything else as a bonus.
“The deals forged over the past few months, including a cross-channel sharing agreement with BT, Netflix and other leading online services indicate that Sky is positioning itself as an aggregator of content and services,” said tech, media and content analyst, Paolo Pescatore. “Sky is the undisputed leader in bundling services in the UK and we now expect it to take the same approach in other markets. Content remains at the heart of the company.”
The original content it plans on producing over the next couple of months is just one cog in the machine. New partnerships with Netflix, Mediaset, BT and Spotify start to evolve the Sky proposition into the aggregator model, while sport is back as the big ticket item with top-league football throughout the continent and the rights to the Ryder Cup at the end of the year.
Sky is evolving its business model to fit the demands of the consumer in the digital era, but it has not gotten distracted with the convergence hype, despite gains in the connectivity game. Sky has not forgotten about its core mission to its customers. A few other businesses could learn a thing or two here.