BSkyB To Announce Drop In Subscriber Rates
BSkyB will next month reveal that it saw just 92,000 new subscribers in the third quarter of its financial year, taking the total to 7.3 million, according to the global equity researchers at Lehman Brothers.
The report shows that subscriber rates, accounting for a 9.5% churn rate – the proportion of customers that left during the period – have fallen for the same period in the previous year (March to May 2003) when 150,000 new customers joined Sky.
Lehman Brother researchers said: “This is a seasonally weak quarter after Christmas and has been compounded by the absence of above the line advertising from Q3 compared to a January sale campaign in Q3 last year.”
Pre-tax profit for Q3 is expected to hit £157 million, this takes the total profit to date for the nine month period to £361 million. Lehman Brothers predicts that by the year end in June, BSkyB pre-tax profit should hit £459 million, this includes an exceptional income of £49 million which was achieved on the sale of QVC.
Direct to home revenues rose by 13.3% for this quarter, taking the year-to-date increase to 14.7%. Advertising revenues were also up, a rise of 12.5% is expected in Q3 and an increase of 16.4% is forecast for the overall year.
Lehman Brothers also predict a small rise in cable TV subs, this to reach 3.3 million from 3.2 million. This prediction is based on turnarounds from both NTL and Telewest after a two year period of decline.
The number of gross additions – the number of new subscribers offset against those leaving – during Q3 2004 has been hard for the equity researchers at Lehman Brothers to predict. The unsteady trends of digital take-up set during 2002 and early 2003, when digital growth was at its peak has made it difficult to predict any future trends. Q3 2004 could be the first quarter which shows a clear gross additions comparison.
However, Lehman Brothers are quick to point out that this does not mean gross additions will continue on a downward trend because this quarter has been specifically affected by a lack of marketing.
Sky Plus is anticipated to have attracted only 25,000 new subscribers this quarter, compared to 129,000 new subscribers in the previous quarter. However this was due to BSkyB taking there time to learn lessons from the Christmas campaign before starting a new marketing campaign in March.
Looking forward, the report suggests that if BSkyB gross additions trend down at 10% year on year and churn stays at 9.5% then the company would miss the 8 million subscriber target by two quarters and not achieve this until June 2006.
Broadcasting stocks are expected to have faster earning potential than similar stocks and trades. However, Lehman Brothers reports that there are two central factors that are likely to weight on BSkyB stock; use of cash and strategy.
Use of cash was not an issue in 2002 when the company had over £1.5 billion of net debt. However Lehman Brothers says that in five years time the company could generate £2.5 billion of cash post dividend and they are sure shareholders would welcome a return on their cash but as yet, the company has not committed beyond the current dividend policy.
BSkyB’s strategy until 2005 is to continue with its top package marketing strategy and achieve 8 million subscribers by December 2005. The company believe that there is far more demand for pay TV services (including BSkyB) in the UK well beyond 8 million. They have talked about segmenting the market to attract niches who have not yet been attracted by the full top package they offer but have not confirmed any execution of this strategy.
BSkyB: 0207 705 3000 www.sky.com
Recent Television Stories from NewsLine BSkyB Secures T-Mobile To Sponsor Euro 2004 Coverage Government Set To Miss Deadline For Digital Switch UK Viewers Call For Change In Way BBC Is Funded
Subscribers can access ten years of media news and analysis in the Archive