Profit for NZ's Sky, though churn a cause for concern

DetailsRebecca Hawkes | 25 February 2015

New Zealand's dominant pay-TV operator Sky has delivered a healthy NZ$92.5 million (US$69.2) first half profit, despite shedding 8,707 subscribers.

Net profit for six months to the end of December 2014 was up 13% on the corresponding period in the previous year, with lower depreciation and amortisation expenses of NZ$54.1 million (US$40.5 million) and a 31% fall in financing costs to $10 million.

Sky TV's revenue increased 1.8% to NZ$464.5 million (US$347.6 million), up from NZ$456.4 million (US$341.57 million) in the earlier corresponding period, thanks to a 3% jump in subscriber revenues, the company said. Some two-thirds of subscribers are now using the more profitable MySky set-top box.

The pay-TV operator's penetration rate fell from 48.7% to 48.3% during the period, reflecting the rise in churn to 13.7% from 13.2%. However, subscriber figures for the period increased 8.8% to 529,000.

Chief executive John Fellet said the drop in subscribers was a "disappointment", if not unusual it has happened to the company for this period in two consecutive years.

"Our challenge has been attracting new subscribers to the platform in a period where the industry is transitioning," said Fellet in a statement.

"The Internet has created an opportunity for new entrants and new business models. If you are a consumer seeking additional content for which you are willing to pay, you now have numerous options in New Zealand," he added.

Including Sky, there are four pay-TV operators in the small but highly competitive market of New Zealand, with US online streaming giant Netflix due to launch its Kiwi offer in March.

In response, Sky has this month unveiled its new subscription video-on-demand (SVOD) service Neon and its Internet TV sports brand Fan Pass. The latter provides single sport, single season access to 2015 Investec Super Rugby, NRL or F1R and is available for those who don't already subscribe to Sky Sport.

"Internet is the future. Just like the transition from UHF to satellite, we're transitioning to the Internet now because it makes sense," said Fellet.
Neon provides thousands of hours of entertainment to PC or Mac users via an Internet browser, or through selected iPhones and iPads through the Neon app. It will soon also be available on Xbox 360 and selected Android tablets and smartphones, according to Sky TV.

MySky decoders are also soon to receive a software update to allow them to connect to the Internet, providing access to either linear or on-demand content, in what Fellet calls Sky TV's greatest innovation and challenge.

"While programmed channels with strong brands still offer viewers an ' la carte' selection of our best content, these exciting new products with their video on demand options will empower our subscribers to create their own viewing priorities and watch-lists for even deeper engagement with our premium Sky content," said Fellet.