Sky Announce Results: A Closer Look
To say 2015 was an important year for Sky would be an understatement. Following 2014 in which Sky completed the £7 billion purchase of its European sister companies Sky Deutschland and Sky Italia, speculation was rife as to whether Sky could continue growth. The British television industry has been in a state of change for some time, with more and more people finding Freeview to be a more than adequate alternative to long, expensive contracts like Sky offer. As such, all eyes were on Sky to see whether their big spending could arrest some of the development and turn the company back into the growth machine it once was.
Now, we’ve got Sky’s unaudited results for the six months running to the end of 2015, and things are looking pretty interesting for the company. So what does it show?
Increased cash flow
Perhaps most importantly to Sky, the six months in question have seen strong growth in the amount of money flowing into the business. Revenue has seen a 5% increase to £5.718 billion from £3.437 billion during the previous two quarters. Further to that, Sky Plc saw statutory revenue increase an astonishing 33%, up from $4.302 billion.
Similarly, operating profit saw a very strong increase, moving 12% upwards to £747 million, potentially as a result of the cost saving measures put into place following the aforementioned European acquisition. Sky are keen to point out that this is the highest ever first half operating profit posted, and has enabled the company to post an increase in interim dividend to 12.6 pence per share.
Germany and Austria are becoming very important
Germany and Austria added 120,000 new customers during Q2, bringing their total number of new customers in that region to over 370,000. This makes Germany one of Europe’s fastest growing pay TV markets. It’s especially good performance considering that churn increased to 9.8% due to customers reaching the end of 24 month contracts. HD saw strong growth over the time period too, rising 8% year on year to 161,000.
Revenue in Germany increased 10% to £693 million thanks to much higher consumer interest in Sky as a product, but the it failed to turn a profit, instead posting an operating loss of £34 million was due to the annual increase in Bundesliga costs, a similar issue it will face in the UK with the increasing price of Premier League football.
Nevertheless, Germany is proving to be a very fruitful market for the company, and if they can continue their growth in the country, things are looking bright.
Content truly was king
Sky, quite rightly, adopted a content led approach for 2015 in an attempt to fend off the likes of Netflix and Amazon. As a result, a tremendous amount of money was pushed into both acquiring content and commissioning it.
That saw record results in movie viewing, as well as record breaking audiences for sport. In golf, the British Masters was the most watched European Tour event of the season and rugby’s Super League Grand final achieved its highest UK audience for five years.
On drama, Sky threw their weight behind landing Flash, Arrow and Supergirl and each got viewing numbers over a million, whilst Fungus the Bogeyman was their best performing Christmas special in over four years. Original content was also a hit, with The Last Panthers seeing 300,000 people viewing the premiere, rising to over 1.3 million as the series went along.
Sky’s plans for 2016 revolve heavily around content, with the return of Twin Peaks, a new series of Ray Donovan and The Affair, alongside wildly anticipated new programming from HBO, like Vinyl, from Mick Jagger and Martin Scorsese.
Customer service improved
Crucial to any business is its customer service success. Sky can now lay claim to industry leading customer service in the UK. The latest Ofcom survey rated them as number one and their Digital First initiative is using our digital channels in the UK more effectively in front-line customer service, enabling our customers to have faster, more flexible service. Year over year, customer satisfaction ratings are up 4%.
2016 will be huge
2016 is shaping up to be a transformative year for Sky. Alongside their continued push into top tier content production, Sky are launching Sky Q, their entirely new TV platform. Taking the form of a series of new boxes, the service will offer 4K content down the line and is positioned at the high end of Sky’s offerings. Coming soon to take up the low end is a new Now TV box which will seamlessly blend live streamed Sky content and Freeview. It should prove to be an incredibly compelling offering, with plenty of new customers heading to the Sky customer services phone number. However, it remains to be seen whether it will cannibalise those people who are Sky customers but aren’t married to Sky+.