Sky plans raft of product innovations and marketing to grow business in 2014

Sky is planning a raft of product innovations and updates in 2014 as it looks to encourage the 13 million households who do not currently subscribe to TV services to pay for content.

Sky
Sky plans a number of product innovations and updates in 2014 to grow its business.

Speaking at BSkyB’s half-year results presentation today, CEO Jeremy Darroch said the company has a £1.6bn transactional market opportunity for growth within the homes yet to take any pay TV service, the 5.5 million customers yet to take HD, the 7 million yet to use Sky Go and the 6 million Sky customers yet to connect their boxes.

Sky plans to specifically target non-customers this weekend with the launch of a new advertising campaign to showcase its upcoming entertainment content.

It will follow up that marketing effort this Spring by launching a standalone broadband offer bundled with its Now TV Box, which offers access to Sky Movies for £8.99 a month, Sky entertainment programmes for £4.99 per month and a £9.99 Sky Sports Day Pass as well as access to free on-demand TV services such as BBC iPlayer.

Andrew Griffith, BSkyB chief financial officer, said the bundle was “the next logical step in terms of convenience” for customers not yet willing to take Sky’s more expensive triple-play option. 

The company is also expanding its movie rental service beyond Sky customers to any consumer via laptops or YouView boxes. The Now TV service itself will also be made available on more devices such as Android tablets and next generation consoles in the coming months.

In terms of better monetising its existing customer base, Sky is launching a “buy and keep” movie service, which Darroch said will “leverage the strength of [the Sky] brand and enable us to innovate at scale”.

Elsewhere, Sky will launch a new-look user interface for its set-top boxes which it hopes will improve content discovery and usage, optimise free trial conversion and encourage repeat purchase.

Griffith said the business is now seeing a “clear and direct benefit from connected services”, which helped boost adjusted revenues by 7.6 per cent to £3.75bn in the six months to 31 December.

Operating profit dropped 8 per cent in the period to £595m as investments in the new services and the ongoing battle with BT Sport in acquiring Premier League rights and marketing its sports channels hit its bottom line.

Marketing costs increased 13 per cent to £613m in the period. Sky says it maintained its share of voice in the market with targeted ad campaigns and marketing around the launch of the Now TV box and entertainment pack in November. Marketing costs represented 16 per cent of revenues, which Sky says is in line with recent trends.

The company’s churn rate was at 10.8 per cent, a rate Darroch said was “in line with recent trends” and was up 0.5 per cent year on year but down 0.2 per cent quarter on quarter. The company added 77,000 TV subscribers and 110,000 broadband subscribers in the last quarter. Average revenue per user grew by £11 in the final quarter to £570.

Darroch said numbers were growing well in a “noisy period” and that the company was absorbing the one-off step up in Premier League costs well.

It has recently been reported that BSkyB may look to make a play in the mobile market, with some suggesting a potential merger with Vodafone, but Darroch said such speculation was “wide of the mark” – although the company remains “open minded” to such deals.

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