Sky Profits Rocket Despite Slowing Subscriber Rates

The satellite provider also posted a healthy revenue gain, up 15% to £3.7 billion. However, it is now being forced to implement an ‘innovative marketing initiative’ to drive subscription rates which fell to 81,000 from April to June 2004 and have consistently missed the target since the second half of 2003 (see Sky Subscriber Rates Drop).

Chief executive, James Murdoch has unveiled an ambitious plan of increasing direct-to-home subscriber figures from the current number of 7.4 million to 10 million by 2010, with 30% having a set-top box in more than one room in the home and 25% owning a Sky+ digital video recorder.

Murdoch said: “Sky believes that through innovative marketing initiatives, designed to address misconceptions about its services identified through extensive consumer research, most of the barriers to take up can be overcome with relatively few changes to its existing product position.”

BSkyB’s marketing budget is also set for a hike as Murdoch added: “The group intends to invest in future growth by a sustained increase in its above-the-line marketing expenditure, which will initially rise by between 40% and 50%.”

The group statement said, as at 30 June 2004, pay-television household penetration in the UK and Ireland was at 43% and believes that in the long-term, pay television penetration will reach 80% of UK households. Commenting on this, Murdoch said: “The group believes that this view is supported by evidence from other television markets, particularly in the US; by demographic factors, including generational differences in the take-up of pay television and by current technological advance and enhancements such as the development of the personal video recorder.”

Speaking after the results announcement Murdoch said that the previously unveiled free-to-air Freesat television service will be launched in October 2004. He added: “It will be an important source of future paying subscribers.”