Sky TV toughs out first year of true competition

Sky chief executive John Fellet. Photo / Natalie Slade

Sky TV has emerged with only a few scratches after its first year facing viable competition in the pay TV market.

New Zealand is now awash with a new wave of internet TV services such as Lightbox, Netflix and Neon.

But nobody is saying how many users they have or how big the total market is.

Today, both Sky TV and Lightbox owner Spark released their financial results to June 30.

Both refuse to say how their video- on- demand services are faring, though estimates of broadband use suggest user numbers are big.

Spark confirmed only that Lightbox had passed its target of more than 70,000 subscribers in the first year, including those who got Lightbox free as part of a broadband package.

Sky TV's strong 2015 result - net profit was up 6.4 per cent to $171.8 million - will encourage investors who believe its mantra that slow and steady transition will win the race against the new pay TV operators.

The one area where the effect of competition is apparent is in programming costs, which increased from 30 per cent of revenue to 32 per cent.

Sky's percentage of households using its service has slipped slightly for the fourth year in a row - this year down from 48.7 per cent to 47.1 per cent.

Chief executive John Fellet said the churn rate - the proportion of users who leave Sky's main network - has increased 1.3 per cent to 14.5 per cent. It has lost a net 13,400 subscribers in the past 12 months.

But those who stayed are spending more: the average subscriber spent $79.54 a month, up $2.02 on last year.

Total revenue was a record $927.6 million.

Fellet said new competition played a part in the slightly higher churn rate, but used the result to reply to critics who said Sky had been too slow introducing new media.

It is Fellet's 14th year as boss of the pay TV company and he is widely tipped to be considering standing down from the CEO role.

Sky and the industry was at an important crossroads, said Fellet, but the old business model would not take it from 47 per cent to 75 per cent [of households].

Sky TV

• Net profit up 6.4 per cent to $171.8m
• Revenue up 2 per cent to $927.6m
• Customers down 1.6 per cent to 851,561
• Revenue per customer $79.54/month