BSkyB 1H net up 8 pct despite drop in ad revenue

AP News
Posted: Jan 31, 2012 6:54 AM
BSkyB 1H net up 8 pct despite drop in ad revenue

British Sky Broadcasting PLC unveiled Tuesday a new venture in video on demand to compete with industry leaders Netflix and Lovefilm as it reported a solid 8 percent increase in first-half profits.

The combination helped BSkyB's share price rally 3 percent to 687 pence.

Britain's biggest broadcaster by revenue said its net profit in the six months ending 2011 rose to 441 million pounds ($692 million) from 407 million pounds a year earlier. Revenue at the company, which is 39 percent-owned by Rupert Murdoch's News Corp., was up 6 percent to 3.4 billion pounds, while the dividend was raised 5 percent to 9.2 pence per share.

As well as publishing its earnings, the company said its new video on demand initiative will target the 13 million British households which don't subscribe to pay television. Video will be offered on a pay-per-view basis, a departure from BSkyB's traditional contract service, and will not require a satellite dish.

The company's chief executive, Jeremy Darroch, said he didn't feel threatened by the video on demand competitors.

"It's further evidence that this is an exciting market and lots of people see opportunities in it," Darroch said.

BSkyB's results were helped by a 321,000 increase in customer numbers during the period, while subscriptions to various products, notably broadband and telephone, increased by 772,000.

Despite its further advance, there are concerns over the company's prospects, which is chaired by James Murdoch.

Steve Liechti, analyst at Investec Securities, is cautious about BSkyB because of possible competitive and regulatory problems.

He noted that auctions for football rights, which have been a key to building BSkyB, will be up for renewal in upcoming quarters. The company also faces growing competition in subscription video on demand.

Alongside its results, BSkyB announced that it was planning a cable-based broadband offering with unlimited usage, delivered via the cable network of telecoms company BT PLC.

Darroch said he expected a tough year ahead, given Britain's sluggish economy and the squeeze on household incomes.

"No consumer business can be immune to these conditions and we will manage any short-term headwinds as they emerge," Darroch said. He added that BSkyB was planning more original productions and is launching a channel dedicated to Formula 1 auto racing.

Last July Sky was embroiled in the fallout from the hacking scandal at News Corp.'s News of the World tabloid, which has been shut down. The scandal prompted News Corp. to shelve its bid to buy the 61 percent of BSkyB shares it doesn't already own.