May 13, 2019 Market Outlook, ReportsSky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesses merged in 2015), due to weaker ARPU trends. However, Sky expects improvement to follow, blaming one-off factors in the quarter. The ARPU weakness drove EBITDA down 11.3%, but this should bounce back across the rest of 2019 as football rights costs turn from a drag to a positive. Comcast highlighted collaborations with Sky across tech, advertising, content distribution and even news, stating it is on track to achieve the anticipated $500 million in annual synergies over the next couple of yearsSky made a surprisingly weak start to 2019, with revenue growth decelerating to 1.9% (the first time below 4% since the European businesse [...]February 4, 2019 Flash Report, ReportsSky’s revenue growth under Comcast appears to have accelerated since it last reported as an independent company, largely driven by sports rights expansion in Italy, which also drove bumper subscriber growth in Q3 2018. Sky UK likely enjoyed a steadier performance, helped by accelerating high speed adoption, a price rise in April, increased international sales, and improving premium channel adoption on third-party platforms. Comcast expects continued acceleration into 2019, with profitability taking a hit from increased sports rights in Italy in H1, but this is more than compensated for by reduced English Premier League rights costs in H2.Sky’s revenue growth under Comcast appears to have accelerated since it last reported as an independent company, largely driven by sports rights expansion in [...]May 24, 2018 Focus Report, ReportsThe UK continues to lead the EU5 in take-up and consumption of video-on-demand services, with close cultural alignment and a historic williness to pay for TV content making it a receptive home for US SVODs. Netflix dominates in most markets, benefiting from high-profile US imports and big-budget local productions. Local SVODs are struggling, with those operated by FTA broadcasters facing considerable challenges. Collaboration between local broadcasters and pay-TV platforms is essential if they are to hold at bay the threat of Netflix and co., with an increasingly favourable regulatory environment opening the door for unprecedented collaboration.The UK continues to lead the EU5 in take-up and consumption of video-on-demand services, with close cultural alignment and a historic williness to pay for TV co [...]July 26, 2017 ReportsAcross Europe, markets are becoming more competitive. Incumbent pay-TV paltforms (e.g. Sky or Canal+) face increasing threats from both internet-based services (e.g. Netflix and Amazon), and telecoms operators.Telecoms providers are proving the most potent challengers as they enter the premium football rights market to create attractive triple and quad play bundles – examples include BT, SFR and Telefónica. The latter is now the main pay-TV operator in Spain whereas France’s Canal+ has entered into a strategic alliance with Orange. Across the top five markets (UK, France, Germany, Spain, and Italy), Sky remains the leading operator with an estimated 21.5m video subscribers, twice as many as NetflixAcross Europe, markets are becoming more competitive. Incumbent pay-TV paltforms (e.g. Sky or Canal+) face increasing threats from both internet-based services [...]July 11, 2017 Reports
The US scripted content boom is spilling over into Europe: Free-to-air TV drama ratings have proven resilient but as costs and audience expectations have risen budgets are under pressure, necessitating flexible co-financing arrangements with American broadcasters, and Netflix and Amazon. Pay channels have boosted output—with uneven results. Long-term IP control is a key factor behind independent production consolidation, led by broadcasters seeking a secure stream of content and diversification away from advertising. Notable developments include the new wave of Berlin-based, internationally-financed series, the rise of domestic French content and Sky Italia’s edgy originals, Telefónica’s giant leap into Spanish dramas, and the continuation of Britain as an export powerhouse.
The US scripted content boom is spilling over into Europe: Free-to-air TV drama ratings have proven resilient but as costs and audi [...]May 3, 2017 Reports
Sky delivered 5% year-on-year revenue growth over the first nine months at constant exchange rates, although operating profits fell due to several factors, most notably the massive step-up in UK Premier League TV payments under the new contract. On closer inspection, relatively weak UK & Ireland Q3 revenue growth compared with previous quarters largely reflects one-off special factors . Otherwise, positive quarters for Sky Germany & Austria and Sky Italy and improving cost efficiencies suggest that the Sky Group remains broadly on track to deliver its Investor Day 2016 guidance objectives.
Sky delivered 5% year-on-year revenue growth over the first nine months at constant exchange rates, although operating profits fell [...]August 8, 2016 Reports
FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% after adjusting for 2016 being a 53-week year) and 12% increase in operating profit. The success reflects Sky’s commitment to product and service innovation and diversification in an increasingly fragmented marketplace combined with tight control of back office costs and focus on synergies. As a measure of its success, Sky has set new cost synergy targets of £400 million annual run-rate by FY 2020 and is aiming for continuing middle to high single digit growth in revenues, which should let it comfortably absorb the rising costs of Premier League and Bundesliga live televised rights under the next contracts.
FY 2016 has been an excellent year, with all three Sky markets showing improved performance as Sky delivered 7% revenue growth (5% [...]June 14, 2016 ReportsThe award of the match packages in the 2017-21 domestic football rights auction in Germany is probably optimal for Sky (within the “no single buyer” constraint): it will broadcast about eight out of nine weekly fixtures including the top picks, while Eurosport’s package is complementary to Sky’s rather than substitutional. Sky will, however, pay a hefty price, with the new contract costing 80% more than the current one – although the new Bundesliga rights value is not out of line with other Continental leagues. We expect Sky’s German operations to briefly break even in fiscal 2017 before falling back into losses with a return to profit if other costs are kept under control. Management has made a bold statement of self-confidence: building scale is the priority.The award of the match packages in the 2017-21 domestic football rights auction in Germany is probably optimal for Sky (within the “no single buyer” constra [...]June 1, 2016 ReportsThe Commission proposes to require VOD services to implement a 20% share of EU works in catalogues, which Netflix already largely meets. More impactful is the EU’s proposal for OTT SVOD services to provide access to the home service when subscribers travel in the EU, benefitting the UK’s 14 million subscribers. TV broadcasters, which observe a 50% EU works threshold in their linear programming served on TV platforms and online players, will be able to opt-in to portability.The Commission proposes to require VOD services to implement a 20% share of EU works in catalogues, which Netflix already largely meets. More impactful is the [...]April 1, 2016 ReportsSky is steadily expanding its output of scripted content – now almost at the same volume as HBO’s. It is an attempt to strengthen the Sky brand in a more competitive market, the ultimate prize being exclusive association with ‘iconic’ content. So far so good: in the UK most originals deliver higher audiences than average and than US imports. Emergence of an iconic hit may be just a matter of time. Sky’s Italian productions are closer to the domestic hit status, but harder to sell to British viewers. The challenge for Sky is to stay in the global series budget race through US co-production and sales without compromising editorial sharpness. Continental European platforms increase Sky’s financial clout, but will require distinct content.Sky is steadily expanding its output of scripted content – now almost at the same volume as HBO’s. It is an attempt to strengthen the Sky brand in a more co [...]October 27, 2015 Reports
Sky has got off to a good start in 2016, as Q1 group revenues grew by 6% and operating profits by 10% year-on-year, while churn stayed low across all three operations, and product net additions of close to one million pointed to continuing strong underlying growth. The Q1 results have softened concerns about the impact of loss of Champions League live televised rights in the UK and Italy, which have so far shown very little effect in spite of intense competitive pressures from BT and Mediaset. Although Sky UK & Ireland has accounted for the entire year-on-year increase in Q1 operating profits, strong subscriber growth in Germany & Austria over the last two years, and signs that economic conditions in Italy are on the mend, provide a positive outlook for the year ahead.
Sky has got off to a good start in 2016, as Q1 group revenues grew by 6% and operating profits by 10% year-on-year, while churn sta [...]October 6, 2015 ReportsThe push for accelerated subscriber acquisition has stalled Sky Deutschland’s underlying growth in profits as promotions have undermined ARPU. After being artificially suppressed by the introduction of two-year contracts, churn is poised to rise. Sky could maintain subscriber growth only through increased marketing and discounting – but this is unlikely. We expect EBIT breakeven before the end of the current Bundesliga contract in 2017. But sustained profitability depends on the outcome of the rights auction to be held next spring.The push for accelerated subscriber acquisition has stalled Sky Deutschland’s underlying growth in profits as promotions have undermined ARPU. After being ar [...]August 6, 2015 Reports
The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: subscriber growth up by 5%, churn everywhere below 10%, adjusted group revenues up 5% and operating profit up 18%. Excellent though the start has been, each of the pay-TV operations faces its own specific challenges – be they to do with ARPU growth in Germany & Austria, subscriber growth in Italy, or football in some shape or form across all three markets and nowhere more so than in UK & Ireland. Most importantly for the Sky European merger, the latest results indicate that Sky is well on course with its target annual run-rate of £200 million in synergies by 2017; but with the UK model to act as a template, it is the fast-growing connected space that catches the eye.
The first set of annual results to include all three Sky pay-TV operations in Europe shows Sky plc to be off to a very good start: [...]July 1, 2015 Reports
News Corp’s original bid for full ownership of BSkyB was withdrawn because of the phone hacking scandal. It was never blocked by regulators. Had it not been for the scandal, the bid would almost certainly have been approved. With the phone hacking scandal fallout largely over and the election of a friendly government, the climate is now much more favourable to a renewed bid. With undertakings, we believe it would be approved by regulators. The increasingly global scale of TV and film distribution means the commercial case for the bid is, if anything, stronger now than in 2010. The questions are simply whether the right price can be agreed, and how high up it is on James Murdoch’s list of priorities.
News Corp’s original bid for full ownership of BSkyB was withdrawn because of the phone hacking scandal. It was never blocked by [...]April 24, 2015 Reports
Sky plc has produced a strong first quarter across its three markets in terms of subscriber growth, record low churn and continuing firm control over costs, which has contributed to a 5% increase in revenues and 20% increase in operating profit over the first nine months of fiscal 2015. As expected, practically all the retail customer growth in Q3 occurred in the UK & Ireland and in Germany & Austria. Nevertheless, the results were also positive in Italy, as it registered the highest net customer increase in 3 years and record low churn. It is still too early to judge the success of the Sky plc strategy in terms of synergies, innovation and content origination. Whilst the potential appears great, the imminence of the next Bundesliga auction is a reminder that the issue of sports rights inflation is unlikely to disappear even after the latest PL auction.
Sky plc has produced a strong first quarter across its three markets in terms of subscriber growth, record low churn and continuing [...]April 20, 2015 Reports
Prospects for European free-to-air commercial broadcasters are clouded by a weak advertising recovery, decline in TV set viewing by younger age groups and increased competition from pay-TV and international operators. Growth opportunities are nevertheless to be found in fine tuning families of channels to sustain audience shares, increased production of differentiating original content, wider HD and catch-up programmes distribution and smart pay-TV developments – broadcasters must focus on strengthening the quality gap between the TV set experience and online entertainment. ITV has shown the greatest increase in profitability, benefitting from its global production strategy. RTL and ProSiebenSat.1 have a modest upside from carriage fees for HD channels but production and pay-TV initiatives have yet to pay off. TF1 and M6 have withdrawn from pay-TV and face regulatory obstacles to launching channels and production investments. Mediaset in Italy should benefit from the ad market stabilising, but risks large pay-TV losses. In Spain, Mediaset and Atresmedia enjoy an ad boom.
Prospects for European free-to-air commercial broadcasters are clouded by a weak advertising recovery, decline in TV set viewing by [...]February 9, 2015 Reports
Sky plc, the coming together of BSkyB, Sky Deutschland and Sky Italia, has enjoyed an excellent start, as adjusted H1 2015 figures delivered a 5% increase in revenues versus a 3% increase in costs, resulting in EBITDA growth of 7% and with free cash flow up by 25%. The strong financial results were accompanied by strong subscriber growth figures, especially in the operations covering Austria, Germany, Ireland and the UK, while all markets showed large reductions in churn, reinforcing confidence in the strategic approach of Sky plc. It is too early to assess Sky’s delivery of its target group synergies. Individually, the former BSkyB and Sky Deutschland markets may be showing much stronger subscriber and product growth, but they also look to be more exposed to risk over football rights, while Sky Italia has more going for it than may appear at first sight.
Sky plc, the coming together of BSkyB, Sky Deutschland and Sky Italia, has enjoyed an excellent start, as adjusted H1 2015 figures [...]November 7, 2014 Reports
The Sky Deutschland platform, which will fall under BSkyB's control by mid-November, continues to post strong subscriber growth, thanks to steady gross additions and declining churn. However, average revenue per user remains flat year-on-year, and declined sequentially for the first time in over four years, raising questions about Sky's capacity to sustain the recent pace of total revenue growth. On current trends, cash flow break-even will not happen before the last quarter of calendar 2016, months before the possible price hike from a new domestic football rights auction. Meanwhile, deployment of Sky's connected TV services appears to be keeping OTT competitors at bay.
The Sky Deutschland platform, which will fall under BSkyB's control by mid-November, continues to pos [...]May 20, 2014 Reports
In Q1 2014 Sky has reaped the rewards of its marketing strategy focused on high quality longer term subscribers with churn hitting a record low, sustaining net adds, while ARPU growth remains healthy However we perceive no change in the underlying trend: Sky's profitability should rise smoothly towards an EBITDA margin approaching 20% in fiscal 2017 the last year of the current Bundesliga contract In a market slow to adopt digital innovations Sky is comfortably ahead of the competition even if trailing international peers. Its long term success will depend on its ability to build on its distinctiveness through its innovative user interface, on demand offering and original as well as exclusive content.
In Q1 2014 Sky has reaped the rewards of its marketing strategy focused on high quality longer term s [...]February 13, 2014 Reports
In 2013 Sky focused on recruiting quality' subscribers: net additions fell but ARPU growth accelerated and most new customers have signed up to two-year contracts, which will lead to a reduction in churn. Now Sky is moving its focus back to subscriber growth. It aims at 400-450,000 net adds this year, including the migration of wholesale DTAG customers a target we find realistic. The 70-90 million EBITDA guidance may be conservative. Without any direct competitor, Sky is rightly enhancing its all-in-one premium appeal. This supports ARPU growth and increases its distinctiveness compared to other providers, including the expected Netflix launch in Germany.
In 2013 Sky focused on recruiting quality' subscribers: net additions fell but ARPU growth accelera [...]March 21, 2013 Reports
Sky Deutschland is reaping the benefits of its re-launch using BSkyB's model, with an improving content offering and quality of user experience, plus a favourable environment for household consumption in Germany. 2012 results came in very close to our forecasts and we predict that Sky Deutschland will break even at EBITDA level in 2013 and turn cash flow positive in 2015. The competitive context is benign and the horizon is clear until the next Bundesliga auction in 2016. But, in the meantime, cable, IPTV, FTA and OTT players are committed to widening their pay offers, which may put pressure on Sky's subscriber growth and content costs.
Sky Deutschland is reaping the benefits of its re-launch using BSkyB's model, with an improving conte [...]April 24, 2012 ReportsSky Deutschland has renewed its broadcast rights contract with the Bundesliga until 2017, removing the most important source of uncertainty for investors and consumers, albeit at the cost of a 77% jump in the fee from 2013/14. Combined with Sky's new exclusive channels, high definition offer and on-demand services, the contract will sustain subscriber growth, but ARPU will only rise slowly. Although we forecast Sky to meet its EBITDA breakeven target in 2013, cash flow should stay negative until 2015 due to rising spend on receivers.Sky Deutschland has renewed its broadcast rights contract with the Bundesliga until 2017, removing the most important source of uncertainty for investors and co [...]May 17, 2011 Reports
Sky's revamped model has delivered a sharp reduction in churn and higher gross additions, accelerating subscriber growth. Rising high definition take-up is sustaining the increase in average revenue per user. Business prospects are improving on stronger private consumption and a carriage deal for HD versions of German commercial channels. Our forecasts have been revised upwards and we now expect faster improvement in cash flow, though it will still be negative in 2013.
Sky's revamped model has delivered a sharp reduction in churn and higher gross additions, acceleratin [...]