Keen appetite for pay TV keeps Sky in healthy profit

By PETER GRIFFIN

Pay TV operator Sky TV's healthy profit and increased viewership left little room for criticism of its operating performance at its annual meeting in Auckland yesterday.

Chief executive John Fellet said there was a "growing appetite" for pay TV, advertisers were willing to pay more for 30-second slots and cheaper decoders and a strong dollar was reducing capital expenditure. There was precious little detail about the merger of Sky and INL, which involved bundling the two into a new company and giving shares and cash to shareholders.

Fellet mentioned Sky's tie-up with video rental chain Blockbuster to supply its new online DVD rental business and a partnership with Telecom portal XtraMSN to drive subscriber growth.

Sky is realistic about the scope of the DVD rental business. Fellet said that after five years, it had just 2 per cent of the market in the US.

"We think this business model will eventually be eclipsed by downloading a movie over the internet," he said.

And Telecom wants to be Sky's conduit to customers once the phone network can handle video transfer.

Fellet gave a brief update on Sky's other niche businesses - Sky Digital Music, which offers piped music into shops and restaurants, and MovieLink, which has sewn up the market for hotel in-house movies.

The music business was producing cashflow of $750,000 a year, and Movielink was generating $2.5 million.