Speaking to analysts as the company announced its latest results today (1 May) chief executive Jeremy Darroch said the broadcaster’s marketing focus in the past three months has mainly been on added-value services for existing internet subscribers, such as its Sky Broadband Shield security software.
“We’ve got too much to advertise, actually, so we have to make choices,” Darroch admitted, adding that the products Sky pushed during the three months to 31 March “tend to appeal more to existing customers than to new customers”.
Although the company, the UK’s biggest spending advertiser, did not reveal media spend or marketing costs Darroch’s comments signal spend might have dipped in the period in contrast to 2013, when Sky upped its spend by 9.63 per cent, according to Nielsen, as it looked to mitigate the impact of the launch of BT Sport.
Sky says average revenue per user improved slightly on the previous quarter, and year on year, with chief financial officer Andrew Griffith saying, “our ability to upgrade customers is a big driver” of the measure.
“We are putting more value into our services and when we do that people are happy to pay a bit more,” Darroch added.
Sky increased subscriber numbers across TV, phone and internet services. Darroch would not reveal the split of TV customers using Sky’s core satellite service versus the cheaper Now TV online offering, though he claimed that both were driving the overall increase.
He added that it was “wrong to pigeon-hole growth” as growth in satellite services, while Griffith rejected the perception that Now TV customers are less valuable to Sky than satellite viewers. Marketing the online service to the 13 million households that would not otherwise take a satellite subscription is key to Sky’s future strategy, he added.
Responding to analysts’ concerns about heavy discounting during the current financial year, Darroch maintained that Sky would remain “competitive” in its pricing against competitors, though he added that “we won’t chase it all the way down if we don’t see value there”.
Revenue for the nine months to 31 March increased 7 per cent year year but operating profit fell 8.5 per cent as a result of investment costs in connected TV services and new content. A newly announced movie licensing deal with Paramount is likely to further dent future profits.
Darroch claimed the investment has paid off, however, with connected TV customers consuming more paid TV services and more content, and being more likely to recommend Sky to friends.
New revenue streams have been opened up by Sky’s AdSmart targeted advertising service launched in January. Half of the advertisers using the service are new Sky customers, Darroch revealed, while a fifth of them have never advertised on TV before.