Sky’s quarterly programming costs top £600 million

BSkyB’s investment in new original programming and increased football rights costs have caused a spike in programming costs at the pay TV operator.

The 21st Century Fox-backed company spent £622 million (US$1 billion) on content in July, August and September its latest results reveal.

Sky said the 6% increase on the £589 million it spent on content in the same period last year was caused by its investment in new UK-originated programmes and a step-up in the cost of Premiere League football rights. Sky has committed to spending more on original programming with the budget set to hit £600 million in 2014.

At the recent Edinburgh International TV Festival, entertainment channels boss Stuart Murphy said the amount it has for original content will not be affected by Sky’s increasing football rights commitments.

Sky reported strong customer growth in the three months ending September 30, but operating profits slipped by 8% due to the increased programming costs and investments related to customer take up of connected services.

In the quarter, Sky reported an increase of 800,000 paid-for subscription products, up 50% year-on-year. The firm added 37,000 net new TV products and 107,000 new customers to HD, while the number of customers using its Sky Go Extra mobile TV service now totals 385,000 after Sky added 219,000 new customers in the quarter.

These gains helped group revenue increase 7% to £1.8 billion. However, operating profit dropped 8% year-on-year to £285 million.

Sky said that the number of connected Sky+HD boxes grew by almost 50,000 a week during the quarter, faster than in any previous quarter. The number of average weekly On Demand downloads also increased fourfold toover 6.5 million while the number of movie rentals through Sky Store more than doubled to 2.1 million.

“We have made a very good start to the year. Strong growth across the board drove a 7% increase in revenues and we added 50% more new subscription products than last year as customers continued to respond to the quality and value we offer. Adjusted operating profit was in line with our expectations as we invest in new services and absorb higher Premier League costs,” said Sky CEO Jeremy Darroch (pictured).