Sky and BT look to online TV to boost bottom line

By SCOTT REID
Published on 22/07/2012 00:00

THE battle for online television viewers will come into sharp focus this week as satellite broadcaster Sky and telecoms giant BT both turn to the net to boost their bottom lines.

Sky will highlight the importance of its newly launched Now TV service when it unveils a further easing in the rate of growth at its core subscription business.

The group – still reeling after News Corp dropped its take-over bid in the wake of the phone-hacking scandal – smashed its ten-million customer target at the end of 2010, but the worsening economy has slowed its expansion.

It will be hoping that the launch of a pay-as-you-go internet TV offering will help it take on the likes of LoveFilm and Netflix which are providing tough competition for its subscription service.

At a cost of £15 a month, Now TV will start by showing films but over the next 12 months it will add Sky’s sports and entertainment programming. A successful push could see the firm add millions of net-based subscribers.

The need for Sky to reach out to new markets will become increasingly clear as its results on Thursday confirm a tough final quarter to the end of June. Investec analyst Steve Liechti estimates that customer additions will have eased to 65,000 in the period, down from 78,000 in the previous quarter, driven by a slowdown in line rental, broadband and telephony packages as Sky comes up against aggressive competition from rivals.

The group, which recently paid £3 billion along with BT for rights to show English Premier League football, is tipped to post a double-digit rise in full-year underlying profits to £1.5bn, helped by its drive to sell more products to existing customers.

Analysts at Peel Hunt said: “Sky has maintained its growth through a mix of compelling content, marketing and technology. Having launched a number of new channels and services, such as the Now TV movie streaming service, we look for other new products in the pipeline.”

BT – due to report on Wednesday – is gearing up for the launch of its own online TV service, called YouView.

The group has upped the rate at which it is installing superfast broadband and recently said it will be able to provide the service to two-thirds of the UK by 2014 – a year earlier than planned.

This has helped it recruit more customers to its BT Infinity superfast broadband and BT Vision, its video and TV on demand service, which offers Sky Sports 1 and 2 – trends which are expected to have continued in its final quarter.

Nomura analyst James Britton expects Infinity to have added 145,000 customers in the three months to June, up from 131,000 in the previous quarter.

BT hopes to accelerate Vision’s growth with the launch of internet-connected Freeview box YouView, which is also backed by the BBC, Channel 4, ITV, TalkTalk and Lord Sugar.

The City expects BT to report a modest 1 per cent rise in underlying profits as it continues to make cost savings to offset falls in phone revenues.