Revs, subs sink but Sky Italia has “never been better positioned competitively” execs claim

Editor | 08-11-2012

Despite posting poor first-quarter results that showed increasing costs, falling subs and declining profitability, Sky Italia remains capable of success in a tough Italian market, the broadcaster’s parent company News Corp claims.

According to the News Corp quarterly results, for the three months to 30 September 2012, Sky Italia generated quarterly segment operating income of $23 million, compared with $119 million reported in the same period a year ago. The decline was attributed to higher programming expenses, including nearly $70 million of rights costs associated with the broadcast of the Olympics and adversely currency fluctuations.

That said, even though US dollar revenues declined, quarterly local currency revenue increased 1% from the corresponding period the previous year led by higher subscription revenues. Furthermore, Sky Italia experienced a net reduction of approximately 40,000 subscribers during the quarter, bringing total subscribers to 4.86 million.

Yet in assessing the outlook for the DTH firm, senior News Corp management believes that although Sky Italia faces a tough economic environment it has never been better positioned competitively.

Commenting on the quarter in the official analysts’ call, News Corp COO Chase Carey said: "In Italy, a decline in subscribers, coupled with the weaker euro and one-time costs of the Olympics, made it a uniquely challenging quarter." Carey revealed that Sky Italia's response to the current situation would be to "stabilise profits in the short term by focusing on quality subscribers to limit churn and to reduce programming and operating costs to a level appropriate to our current subscriber base." Carey bullishly stated that Sky Italia’s competitive position was strengthening as “others struggle in this market".

Stressing the point that declining profitability at Sky Italia was driven by higher programming expenses, including $70 million related to the Olympics broadcasting, CFO Dave DeVoe added: “The timing of this additional premium programming was not ideal given the current challenging economic environment in Italy…. [Sky Italia is] the strongest player in a market where others are struggling."