BSkyB profits rocket by a third

The phone hacking scandal hasn't had much of an effect on the company. Although the relationship between Murdochs Jr and Sr doesn't look good.

by Emma Haslett
Last Updated: 23 Nov 2011
If Tom Watson and the rest of the phone hacking gang had expected their allegations to hit the likes of BSkyB where it hurt, they were sadly mistaken. The broadcaster, which is 39% owned by Rupert Murdoch’s News Corp, has reported that operating profits rose to £327m in the three months to 30 September – that’s almost a third up on the same period last year. But the scandal has left its scars – most notably in the relationship between chairman James Murdoch and his father. Although, to be fair, results from some of the UK’s other large firms suggest things could be an awful lot worse…

Part of Sky’s success is down to a tremendously successful attempt to cross-promote its other services. Thus, it’s increased the average revenue per user by £25 a year to £535, while the number of customers who now get the holy trinity of TV, broadband and phone services from Sky rose by a whopping 29% in the quarter, to 2.9m. It also added 150,000 extra broadband users. The only slight let-down was the 26,000 new pay-TV subscribers it added, which sounds reasonably healthy, until you take into account that this time last year, it had signed up an extra 96,000. Although during tough economic times, a certain amount of that sort of thing is to be expected – and given that 50% of households now have Sky TV, saturation point is surely fairly close…

You’d have had to have ostrich-like powers of head-in-sand-sticking not to know that Sky was, of course, due to be bought up by News Corp until the phone hacking scandal threw a spanner in those particular works. In light of the scandal, though, News Corp opted to return £1bn to shareholders, rather than shell out $12bn (£7.5bn) for the 61% of Sky it didn’t own. Although there have been speculations that the buyout has simply been delayed to a later date, Rupert and James Murdoch face a tough AGM this week: apparently, some shareholders are planning to vote against the re-election of ‘several directors’ to the board – including Murdoch Senior …

What could make things even more difficult during the AGM is an article published yesterday in the New York Times which claims ‘infighting’ between father and son could put paid to the succession plan everyone had been counting on – ie. that James will take over from Rupert. Apparently, though, there’s trouble in paradise: there have been increasing tensions between ‘a young technocratic student of modern management (James) and a traditionalist who rules by instinct and conviction’ (Rupert). Last winter, things apparently got so bad that Rupert ordered his son back to New York – which James has yet to comply with. And the hacking scandal can only have made things worse…

Still: at least they’re making money, eh? That’s not the case across much of the UK at the moment: you only have to glance at the likes of Argos owner Home Retail, which saw profits drop to £28m in the 26 weeks to August 27, from £54.4m a year earlier. Terry Duddy, the group’s CEO, said it was because it had been forced to discount so much. And the bad news is that since the results period, the company says it hasn’t seen the sort of trade it would usually expect in the run-up to Christmas. By that reckoning, Christmas 2011 is already shaping up to be particularly un-merry for retailers…

- Look out for MT’s profile of BSkyB CEO Jeremy Darroch in next month’s issue, out on November 2.

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