The competition in the pay-TV and broadband market is seriously hotting up. BSkyB has just revealed that subscriptions to its services grew by 715,000 in its third quarter, meaning it has a total paying subscriber base of 30 million. Average revenue per customer has risen by £30 to £576 since the same period the previous year, a jump which the firm puts down to people buying into additional services such as broadband, where the number of subs has risen by 500,000 since a year ago.
Against a backdrop of this kind of growth, why does it feel the need to ramp up its efforts? Well, the competition is getting stiffer. BT is making good headway in its quest to muscle its way into the market. Sky still relies on the satellites, and BT is relying on internet-connected TV, which is hopes will result in a lot of cross selling for its phone and broadband products. In addition, BT has been buying up a lot of sports rights, which it hopes will allow it to get a foothold using the same model as Sky did when it first started out.
If it isn’t worried about losing its grip on sports coverage, Sky ought to be a little concerned about customer churn, however. It means the number of people who leave the service for another provider (or just to cut their household bills), and Sky suffered a 10.8% churn rate in its Q3, up from 10.1% a year ago.
Still, the firm has just managed to get its mitts on the US Open and ATP World Tour Tennis tournaments, which helps combat BT’s rights to 38 Premier League footie matches as well as a smattering of Premiership rugby. And anyway it seems that BSkyB is on the warpath at the moment: back in March it reached a deal which added another half a million customers. It paid £180m to acquire the O2 and BE fixed line and broadband brands, and another £20m will also be paid once all of these customers have been switched over to Sky.
The deal makes Sky the second biggest broadband provider in the UK. It also – and this is crucial – allowed Sky to overtake rival Virgin Media in the broadband stakes in one fell swoop.
BSkyB chief exec Jeremy Darroch (who was interviewed by MT last year), said: ‘Our multi-product strategy is delivering strong results. Increased take-up across our product set led to another improvement in financial performance with growth in revenues and profits accelerating in the third quarter.’ And he’s right: revenues were up 6% to £5.4bn for the nine months to the end of March.
But MT senses this is only the beginning of the war. Now the BT is seemingly willing to spend billions prizing open a piece of the market for itself, Sky has definitely got its work cut out.