BSkyB has announced today that its pre-tax profits for the six months ended 31 December 1998 fell by 58.6% year on year to £53.2 million following the launch of digital satellite television, Sky Digital, in October last year (see Digital Launch Update). Turnover at Sky stood at £753 million (£691.8 million last year), 65% of which came from direct-to-home subscriptions, 15% from cable subscriptions and 14% (£103 million) from advertising.
However, despite the dent in profits, Sky is celebrating meeting its initial sales targets for Sky Digital subscriptions. Sky hoped to achieve 200,000 digital sales by the end of last year but actually secured 275,000; the company has also announced sales of 350,000 by the end of January this year. The figures exceed both Sky’s and Merrill Lynch’s predictions of the take-up rate of digital satellite TV (see Digital Launch Update).
What is significant about the 350,000 is that only 34% of these digital customers are new to Sky’s services; the remaining subscribers have merely converted their existing analogue subscription to a digital one. By the end of December only 120,000 of the 275,000 digital customers were new ones. Sky requires new customers, as well as converting existing ones, in order to cover the high costs of launching digital television.
Sky is hoping to drive digital sales further with a strategic marketing alliance with AOL, announced today. Sky is to supply content, including the Sky Sports website, to AOL. In return, AOL is to market Sky Digital to its subscribers. A new target of one million subscribers to Sky Digital by October has been set today. More details of the AOL deal will be available on Newsline shortly.
ONdigital, the digital terrestrial television (DTT) broadcaster, and Sky’s rival, is yet to disclose details of its sales figures, although reports suggest that around 60,000 of its set-top boxes may have been sold. ONdigital, which is joint owned by Carlton and Granada, recently announced a promotional incentive to potential customers by offering Sky Sports 1 free for six months, with Sky Sports 3 free as a bonus.
Sky also announces today that its interactive services venture, Open, has signed up new service providers – Dixons and Argos. Mark Booth, chief executive, says: “Open will provide a step change to the digital platform, providing e-commerce for the mass market through the television – at no extra cost. The inclusion of such well known brands as Dixons and Argos make it a very attractive proposition for consumers.”
Shares in BSkyB stood at 449.2p at 11:00am today, up by 34.9p on the previous day’s close.
