Wednesday was another painful day for the FTSE 100: the index fell by 189 points to 4040.9, a 4.5% drop, as the miners and bankers took yet another pasting. But one of the hardest-hit stocks was BSkyB: the satellite broadcaster saw its share price fall by over 11%, as investors worried that pay-TV customers were likely to cancel their Sky subscriptions as the recession bites. And it looks as though a single market research report was to blame.
Today’s fall was seemingly the result of a report from media specialists Continental Research, which made grim reading for BSkyB (and other pay-TV specialists). Its survey (of 1,022 people in the UK) found that 18% were planning to reduce their spending on TV services in the coming year, while 13% were planning to switch to a cheaper package (by cancelling some of their premium channels, for instance) and 7% said they’d stop paying for extra channels altogether. Another 6% are postponing plans to upgrade.
The received wisdom tends to be that if times get tough, people will stay in more and watch more TV – which ought to be good news for BSkyB. But the survey suggests that people are looking to save even more of their cash – and with the emergence of Freeview and internet-based services, pay-TV may soon be a luxury we can live without. ‘With new ways of watching TV now available, the credit crunch could actually be the impetus that causes a significant change in peoples’ viewing behaviour,’ says Continental’s Tim Barber. The big winner (apart from Continental itself, which probably can’t quite believe that their little survey has caused such a storm) could be Freeview – 13% of respondents were planning to get that in the next year.
There’s only one problem with all this: Sky’s churn rate generally stands at about 10% anyway – so this proportion of people threatening to hang up their satellite dishes is more or less par for the course. And since Continental didn’t run the survey last year (as far as we know), it’s hard to conclude that the outlook has deteriorated significantly.
Of course, BSkyB will probably find it tougher in the coming months, as will every consumer business. But we can’t help feeling that an 11% fall in the share price, based on the preferences of a few hundred people, seems a little overdone. It just goes to show how jittery the market is when a relatively insignificant market research report can destroy a few hundred millions of pounds of shareholder value in one day...