Returns from Sky and Stuff years away, says INL

Independent Newspapers (INL) says its heavy investment in pay-television company Sky TV and its internet site Stuff (www.stuff.co.nz) will take years to return a profit.

But INL, 49.3 per cent owned by Rupert Murdoch's News Corp, is happy with its investments.

"I can't overstate the value of Sky in the future," chairman Sir Colin Maiden told the annual shareholders' meeting yesterday.

He said that ironically, Sky's runaway success meant the need for greater investment and a longer wait to return a profit.

Sir Colin said Sky's full value was not reflected in INL's share price. INL owns 47 per cent of Sky, which has a market capitalisation of more than $1.25 billion.

Managing director Mike Robson said he expected Sky's subscriber base to rise to 400,000, one-third of all households, by the end of this year, from 392,000 at September 30.

Half of those subscribers would be attracted by Sky's new digital service, which required considerable investment by Sky, he said.

It was not beyond the bounds of possibility to reach half of all New Zealand households in a couple of years. And depending on its growth, it would take about that long to reach profitability.

Sky had been hit quite savagely by the fall of the New Zealand dollar because it buys much of its content in US dollars. Additional costs were of the order of $10 million a year.

Mr Robson set a target of three years for Stuff to become profitable. It had been a revenue earner since its launch on June 27. But Stuff was likely to lose between $1 million and $2 million in its first year.

The INL directors voted themselves a 14.3 per cent fee increase at the meeting, lifting each director's fee by $5000 to $40,000.

Sir Colin told shareholders that the increase equated to 4.5 per cent a year since the last fee rise. Asked after the meeting how he squared this with much smaller increases for employees, which were simply in line with the cost of living, Sir Colin said the size of the increase was below the market for directors.

- NZPA