Sky TV sees 2016 profit falling as much as 11% as revenue growth stalls

Wednesday 21st October 2015 1 Comment

Sky Network Television, New Zealand's dominant pay TV provider, expects profit will fall as much as 11 percent in the 2016 financial year, with largely flat revenue and increased capital expenditure.

The Auckland based company expects profit to be between $153 million and $158 million in the year ending June 30, 2016, below the $172 million it reported this year, according to presentation slides for the company's annual meeting. Sales are expected to be between $928 million and $938 million, little changed from $928 million in 2015, while capital expenditure will increase to between $125 million and $130 million, from this year's $115 million.

The pay-TV company is battling to retain customers against the rise of on-demand streaming services, such as US content provider Netflix. Sky is spending $120 million over three years to replace its old digital decoder boxes with new My Sky decoders for about a third of the price it paid for its original digital boxes in 1997. As well as enabling internet access to video-on-demand services, the new boxes will be able to compress more information, allowing the company to access double the satellite bandwidth for no extra cost.

To drive future growth, Sky is also investing in other models, such as a short-term sports subscription service FanPass, low-cost pay-TV service Igloo and subscription video-on-demand service Neon.

"The delivery of new services including Neon, FanPass and SKY ON-Demand has increased costs ahead of attracting a critical masss of subscribers," chairman Peter Macourt said in speech notes. "Further the 2016 year will also see an increase in programming costs for the Rugby World Cup, the new SANZAR Rugby agreement, the new Disney and Discovery channels and a general escalation of content costs with the entry of new competitors."

There was also the expectation some subscribers would ditch their SkyTV account once the Rugby World Cup finished, he said.

Sky TV shares dropped 5.7 percent to $4.95 and have fallen about 13 percent since the start of the year.

BusinessDesk.co.nz

Comments from our readers

On 21 October 2015 at 3:27 pm d cowan said:

At the same time they announced this big drop in profitability, they also voted in a $200k increase in Directors fees, much to the Shareholders Association's displeasure. No wonder the hare price is getting punished