Sky: Internet competitors too cheap
Sky Television has posted a 14 per cent drop in its annual profit, but chief executive John Fellet pointed out the Kiwi firm was still making almost as much profit as United States giant Netflix.
In what may be its last year as an independent company, ahead of its proposed merger with Vodafone New Zealand, Sky reported a $147 million profit for the year to June 30.
Revenues were up just 0.1 per cent at $929m and its combined satellite and internet TV subscriber base also rose by a similar fraction to just over 852,000.
But revenues from its core satellite-TV business were down almost 1 per cent and Fellet cautioned investors that at this stage its internet-based services – which include entertainment service Neon and sport service FanPass – were ‘‘not as shareholder-friendly’’.
Discussing the changes sweeping through the industry, Fellet said the internet-television services that Sky competed against were ‘‘priced too low to be commercially viable’’.
Netflix, which has almost 100 times as many subscribers as Sky around the world, was ‘‘significantly less’’ profitable than Sky with a profit margin of just 1.9 per cent, he said.
Last year Netflix made an annual profit of US$122m (NZ$167m) on revenues of more than $6b.
Sky warned investors in May to expect its subscriber numbers to drop by 20,000 to 830,000 in the year to June 30, following the Rugby World Cup.
The warning sent price sharply down.
It forecast then that a 45,000 drop in its satellite-TV subscriber base would be only partially offset by a 25,000 rise in the number of customers who signed up to its internet television services.
There was gloom this month when a lawyer representing Sky in a court battle with Fairfax Media over Olympics footage, Julian Miles QC, said that Sky’s television ratings for the Olympics its share had not been as high as hoped.
Fellet said the first weekend was ‘‘scary’’, but ratings then picked up.
Investors have got in strongly behind the company’s proposed merger with Vodafone NZ and Sky’s shares rose 3 per cent to $4.83 in the wake of the annual result.
The $13.4m cost incurred so far in preparing for the merger accounted for just under half of this year’s profit drop.