Sky eyes ‘unprecedented production scale’ and streaming partners

Sky CEO Jeremy Darroch has said that recently launched production arm Sky Studios will allow it to work on an unprecedented number of European shows and has touted the UK-based pay TV operator as a potential partner for soon-to-launch streamers from companies such as Disney.

Darroch (below) said the launch of Sky Studios, which revealed plans to double its investment in originals last month, would give the Comcast-owned pay operator an opportunity to “develop European stories at a scale that we’ve never really seen before.”

The division will create new productions for Sky channels, NBC broadcast and cable networks, and Universal Pictures, as well as for other distribution outlets. Its launch comes on the back of success for Sky/HBO co-production Chernobyl (pictured), which the UK pay operator has described as its most successful original production ever.

Speaking on Comcast’s quarterly earnings call yesterday, Darroch said that Sky would double the amount it spent on originals to “complement all of the acquired programming that we are getting from around the world.”

He indicated that Sky was not concerned about the impact of new direct-to-consumer offerings from the likes of Disney and WarnerMedia because they are likely to partner with the pay TV operator.

Sky added an impressive 304,000 net customers across its pay TV and OTT offerings in the second quarter, taking its total ‘customer relationships’ figure to 24 million. Sky accounted for the lion’s share of Comcast’s net growth of 456,000 customer relationships.

On Comcast’s earnings call, Comcast CFO Michael Cavanagh said that Sky’s growth was primarily driven by streaming subscribers.

Cavanagh said that Sky customers were spending 20% more time watching Sky content, including sports and other channels, than last year, boosted by Sky Atlantic hit Game of Thrones from HBO and the aforementioned Chernobyl.

During the call, Darroch said that Sky’s investment in Sky Studio “isn’t really predicated on anybody else” and that the the group intended to double the amount of original programming that it had and “take that further quickly if we so want.”

However, he said, Sky could also be “a really fantastic partner” for new direct-to-consumer players such as Disney and WarnerMedia or “anybody else who wants to develop a D2C business in Europe.”

Questioned about the impact of new D2C initiatives on Sky’s pipeline of acquired content, Darroch said he expected new services to forge partnerships with pay TV providers such as Sky.

“The first question they’re going to have to ask themselves is where are all the pay TV customers, and on the whole, that means Sky. I would hope that with the relationships we have, we’ll continue to be able to work with many people to help them and us be successful,” he said.

Sky revenue for the quarter was US$4.828 billion, down 3.3% in absolute terms but up 2.4% at constant currency. Content revenues grew the fastest, up 27.7% at constant currency to US$376 million. On the downside, Sky’s ad revenues fell by 5.6% to US$563 million.

Direct-to-consumer revenue was up 1.7% at US$4.049 billion.

Comcast revenue was up 23.6% to US$26.858 billion following the Sky acquisition, while adjusted EBITDA was up 17.5% at US$3.125 billion.