Football costs weigh on Sky profits

Sky saw its operating profit fall by 11% to £1.013 billion (US$1.3 billion) in the first nine months of its current financial year as the increased cost of Premier League football rights took its toll.

The pay TV giant nevertheless saw revenue grow by 11% to £9.6 billion in the same period.

Operationally, Sky grew its customer base by 100,000 in the third quarter, taking its total subscriber base to 22.4 million across the countries in which it operates – the UK, Ireland, Germany, Austria and Italy.

Sky’s revenues were boosted by the strength of the euro. On a constant currency basis, revenues increased by 5%. EBITDA declined by 6% to £1.525 billion.

Overall costs grew by 8% to £8.628 billion, due to the increased cost of Premier League rights. Sky is under increasing pressure from pay TV rivals over the premium sports rights, particularly BT in the UK.

Sky’s performance was boosted by Germany and Austria, where revenues grew by 10% to £1.382 billion, leading the unit to post its first ever operating profit at the nine-month stage. EBITDA rose by 117% to £78 million. Sky Germany had 4.9 million customers at the end of the third quarter.

Revenue also grew strongly in Italy, rising by 7% to £1.849 billion, while EBITDA rose by 44% to £202 million. Customers in the Italian market numbered 4.8 million at the end of March, up 68,000 year-on-year.

UK revenues grew more slowly, hit by the “more challenging environment” in the quarter to March and a decline in the advertising market. Sky’s UK and Ireland customer base totaled 12.7 million at the end of the third quarter, up 40,000 year-on-year.

“It’s been another strong quarter for Sky, despite this being our seasonally quietest period,” said Sky CEO Jeremy Darroch. “We continue to perform well, attracting another 106,000 customers across the group in the quarter, taking growth to 769,000 over the last twelve months. We have delivered strong revenue growth of 11% and are on track financially with operating profit for the nine months exceeding £1 billion.”

“Looking forward, we enter the final quarter of our fiscal year in good shape. Despite the broader consumer environment remaining uncertain, we continue to deliver on our strategy and are on track for the full year.”     

Sky’s results were accompanied by its announcement of a new production partnership with HBO and the unveiling of plans to show Test cricket in the UHD format for the first time.