31 January 2012
Q: These look like an impressive set of results, but which areas are you most pleased with?
A: Well generally I thought the business performed strongly right across the board actually in the quarter and half year, so I was pleased overall with our performance. And it's been another quarter of good growth. So we added 800,000 product sales during the quarter, we grew our base of household's to 10.5m UK homes and the financial performance of the business was really very strong, so we've delivered another half year of double digit growth in cash flow, profit, earnings.
So generally, I thought the performance of the business, not just in terms of our operating metrics but our financial metrics was pretty good. And then we also entered 2012 with a strong set of plans. We've got a number of announcements we are making today, which I think positions us well as we enter the new year.
Q: Now the take up of your pay TV customers was down, was that a disappointment for you?
A: No it wasn't. You know the business has really moved on from focusing on pay TV customers alone as how we grow, and we've really embedded a multi-product strategy now in the business and that gives us a lot more optionality around how we grow the business. So our total rate of product sales I was pleased with. Obviously it has been a tough environment and consumers are more cautious as we've seen across many markets in the run up to, and through, Christmas. What our multi-product strategy I think is allowing us to do now is to rotate our focus, and that's what's feeding through into a very strong financial performance again.
Q: You mentioned the economy there, it is tough, so how do you think that's impacted on your performance?
A: It's a headwind I think. I don't think any consumer business will ever be immune from the economy, and actually I was pleased that we were able to grow again despite some of those headwinds. And the loyalty rates that we are seeing from our existing base of homes continues to be very strong, and they continue to take more services from us.
So I think it's going to be one of the things that we'll find is a bit of a challenge as we move into 2012, but I think we are well placed to come through that.
Q: And when it comes to loyalty your churn figure has remained consistent, is that a surprise given the economic backdrop?
A: Well again I was very pleased with churn which stayed flat year-on-year. We've done a lot of work this year in terms of customer loyalty and churn. We've frozen our prices for existing customers. We are putting a lot more value into our subscription, whether that's with the quality of our television offering or the innovation that we are bringing in that allows customers to get more out of their subscription service.
So I was pleased to see the results of those things translate into really good rates of loyalty, and if we can keep doing that and keep getting better then I think there will be a lot more for Sky customers next year and hopefully therefore they are going to stick around for a bit longer.
Q: Turning to content now, are you satisfied that the increased level of spend that you've made in programming is bearing fruit now, and what else have you got in the programming pipeline?
A: I am actually, and I think we are really starting to see some of the benefits of that come through. So we are trying to do two things broadly in content. We are trying to build on our existing areas of strength - areas like sports and movies - but also align this major new pillar of our content business with our entertainment channels.
And we closed the quarter with a record number of premium subscribers across all platforms, and our entertainment business here really made good progress; so viewing of our entertainment channels were up by 20% year-on-year.
So I think both of those things were strong indicators of performance on the back of that investment starting to come through and benefit the business.
Q: And of course your Formula One channel launch is in March, what can you tell us about this and are you expecting to see an uptick in customers with new customers coming in to take up the channel?
A: So I think Formula One is a pretty good example of where we can acquire a really high quality piece of content and get behind it right across our business. So we'll have a dedicated channel for Formula One, so as we say when the green light is on in the pit lane we are going to be covering it. And that will give fantastic coverage for F1 fans.
We'll build out things like companion apps and our online services to provide a greater richness to our coverage. But we'll also use it in our acquisition and retention marketing, we'll use it to help grow our advertising business, potentially to increase our wholesale revenues as well.
So I think it's a good example of where we can take a great piece of content and really get behind it right across Sky, and get a lot of value from that, so it’s a very, very good place for us to invest our capital.
Q: And a big announcement that you're making today is the launch of your own OTT service. What more can you tell us about that?
A: Well again it's just another way that we can provide more choice to customers. We've been an early mover in OTT with services like Sky Player and Sky Go and we can now extent this with a new service that we'll launch this year. It will initially focus on movies but we'll then extend into sports and entertainment.
And this is a further way that we can go to consumers who perhaps don't have Sky today and offer them a way to get Sky content that's going to be flexible, easy to use and convenient. So we think we've got a great set of plans and we are looking forward to getting that service into the market later in the year.
Q: But is there any sense this is a defensive move because there are some new players about to enter this market?
A: No, as I say we've been delivering our content over the top for some time now. It now makes sense I think with the growth of connected devices for us to push more fully in that area. Sky has always been a business about choice, how does it broaden what we do. And wherever we see a major distribution opportunity we will try and get our content there because it makes a lot of sense of do so. And of course we can deliver that through a common infrastructure, so it's efficient for us to do so as well.
Q: And just finally on content how are you feeling about the forthcoming Premier League rights auction?
A: Well you know it comes around every three years. We are sort of in the run up to that renewal now. We are in good shape. We've got a very experienced team. And we'll just stay focused on what we want to do and what we want to achieve through that and we'll see how that develops over the next few months.
Products, services and innovation
Q: So over one million of your customers are now using the Sky Go service every month to access content on their tablets and smart-phones. What's your strategy for developing this area of the business?
A: I've been really pleased actually with the take up of Sky Go which has been ahead of our expectations. I think there are really encouraging signs now that this may be another leg or another opportunity for the business. So, given that, our plans are simply just to get better, we want to extent the distribution of Sky Go, we are going to take it to the Android platform which is around another 5m devices we'll be able to deliver over the top on.
But also we want to get the quality better, so we'll add Sky Atlantic, Sky Living, Sky Sports F1 and other channels over time to build out the service and give a greater richness to it. And I think if we do that then we should continue to see good uptake from new customers and increased usage patterns as well.
Q: And you've also announced that you’re launching your own fibre service for customers today, so what can you tell us about that proposition?
A: Well we are doing three things, three initiatives in broadband that we've announced today. First of all we are going to extend our own LLU [local loop unbundling] footprint and take that up to 88% of the UK and that will allow us to offer our best broadband product to an additional 1.4m households.
Secondly we are going to launch Wi-Fi service which will be free to Sky broadband unlimited customers.
And then thirdly we'll add a fibre product to our line up as well, which will be up to 40 megabits, £20 a month, we'll use BTs local infrastructure to off load to our own core network.
So, again, taken together I think the three things will just represent a significant enhancement to what we do in broadband. That's an area where we are seeing particularly good growth right now. And we want to keep pushing on and developing our service.
Q: Have you see any further developments when it comes to the Competition Commission and their efforts to break up what they perceive to be your control over pay-TV movie rights?
A: No particular update today and we continue to work with the Competition Commission. We'll see how that review progresses over the course of the next few months. We have a strong view that intervention isn't required in this marketplace. The movie studios I think believe that intervention isn't required. We are seeing more and more new competitors in the market who are either successful or very confident about their own ability to succeed. So I think this is a market where you've got tacit evidence of vibrancy, of new competition emerging that's working well for consumers, providing more choice. And I think the market itself is perfectly capable of developing and working well in the future.
Q: And just looking ahead how do you view the outlook for the forthcoming six months?
A: It's been a reasonably tough last six months to 2011 for all retail and consumer businesses, and we don't see a significant change in that in the early part of 2012 so we'll have to play what's ahead of us. But I think as a business we enter it in really good shape.
And hopefully as you've heard today we've got a really strong set of plans, some great initiatives and we'll stay very, very focused on delivering a balanced approach to both growth and returns, because we believe that that's the best way to growth sustainable value over time.