Net profit rises but is Sky falling?

Last updated 05:00 25/02/2014

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Sky TV's days of holding a virtual pay-TV monopoly could be numbered, as Telecom's proposed ShowMeTV joins Quickflix to nip at the broadcaster's heels, media analysts say.

The Pay-TV provider's half-year net profit bounced up 22 per cent to $85.1 million for the half-year to December 31, but editor Regan Cunliffe said the broadcasting behemoth now had competition. Telecom's internet streaming service ShowMeTV is open to non-Telecom subscribers, but content details were minimal.

Cunliffe said the New Zealand television and communication industry had been " incredibly slow" to respond to international technology advances and as such had lost viewers who used international and, in many cases, illegal streaming and downloading services.

"Some of this is too little, too late and the chance to capture those audiences is gone, because why would you pay for a more limited number of television or movie options, when you can get more for little or no cost?" Cunliffe said.

However, "content is everything" and the new competitors have a long way to go to catch Sky's premium content, which is anchored by live sports, he said.

Sky TV chief executive John Fellet said he rejected the idea Sky had a monopoly and that "anyone could quit their job and start a TV channel, now that Freeview had launched".

"I'm never comfortable; New Zealand is one of the competitive markets for television in the world," he said.

Fellet said subscription video on demand (SVOD) - the model used by Quickflix and presumably ShowMeTV - worked well overseas, except in live sports markets. SVOD tends to compliment rather than replace traditional pay-TV subscriptions, he said.

The inflated costs of broadcasting the London Olympics would not be repeated in the Rio Olympics in 2016.

"We have got the rights to Rio and we will learn our lessons, not necessarily from having fewer channels broadcasting coverage, but from finding efficiency when it comes to commentary and resourcing," Fellet said.

Morningstar senior equities analyst Nachi Moghe said: "Sports is still the financial centrepiece of Sky, so any competitor would have to really challenge them on sports. Then investors would be really worried".

Internet competitors could challenge Sky for movies and serials, but Sky had countered that with the launch of SkyGO which puts Sky content on phones and iPads, Moghe said.

The number of homes with Sky dropped by 6000 in the second half of 2013 compared to the first half of the year. But sales of the high definition-capable MY SKY recorders jumped 30,000 to 486,000 subscribers, helping to boost the profit.

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MY SKY account for 56.7 per cent of Sky's subscriber base at the end of 2013 compared to 50.1 per cent in December 2012.

Sky increased its interim dividend by 2 cents a share to 14c, payable on March 17. Revenue of $456m for the period was up 2.9 per cent, and advertising revenue was up 6.3 per cent to $35.5m. Sky's shares closed more than 6 per cent up at $6.08.

- BusinessDay

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