BSkyB Results To Beat Consensus, Says Lehman Brothers

The broker forecasts that Sky will add a further 128,000 customers to its digital satellite service, taking the total to 6.84 million. This growth prediction is at the top end of the range of forecasts, which have a consensus figure of around 100,000 additions.

Lehman has reduced its subscriber forecast from the previous 6.86 million, saying that Sky has not been pushing too hard on customer marketing and acquisition over the last two quarters as it will comfortably hit its target of 7 million subs by December.

A key figure in Sky’s results will be the percentage of customers taking the top tier programme package, say analysts. Last quarter this figure fell from 55% to 54%; Sky described this drop as a seasonal affect – that is, the end of the football season. The broker says that it will be important to see that this 54% has not declined to 53% or lower.

Churn – the proportion of customers cancelling subscriptions in the period – is expected to rise slightly from Q3’s all time low of 9.3%, but will not be a great deal higher, says Lehman.

On the basis of the broker’s figures, Sky has raised its share of the UK pay-TV market from 64% a year ago, to almost 68% by June this year.

Advertising revenues are expected to be up by 11.0% in Q4 after an 18.0% rise to £71 million in Q3 and 14.5% rise across the first three quarters of Sky’s financial year. Sky’s share of the television advertising market is 9% and rising as new deals begin to kick in.

Sky+ PVR uptake Sky is hoping that the number of people taking its personal video recorder (PVR) system – Sky+ – will reach 100,000 by June 2003. At the time of the Q3 results there were only 79,000 Sky+ users, on additions of 14,000. The fourth quarter will therefore have to show stronger growth of 21,000 to hit Sky’s target.

BSkyB’s chief executive, Tony Ball, has already hinted that the PVR may be the next killer application for the company. Whilst PVR technology is causing ripples of worry in the advertising community because it allows viewers to skip the ads, for cable and satellite operators it could provide a whole new revenue stream (see Forecasts).

Sky is set to begin pushing the Sky+ offering to consumers more strongly in the run up to Christmas. It has signed a new supply deal with Amstrad and has hired advertising agency Red Cell to put together a promotional campaign.

Premier League bids Reports have claimed that BSkyB has bid for all three of the Premier League’s broadcasting rights packages, with a combined offer of around £1 billion for three seasons (see BSkyB Bids To Retain Premiership Prize). Lehman Brothers analysts also believe that a bid for all three live packages has been made, although they do not quote a figure.

Analysts believe that Sky is capable of outbidding other broadcasters without offering more money than in the previous contract, which stood at £367 million per season.

In addition they believe that the League will successfully convince the EU that exclusivity of broadcasting rights should still be permitted. Sky has already made it clear that for any deal which precludes exclusivity it will substantial drop its offer.