Sky is ramping up efforts to compete with streaming giants such as Amazon and Netflix with plans to increase investment in Sky original programming by 25%. In an earnings report released on Thursday, the European pay-TV giant also confirmed plans to launch in Spain as the company returned to profit growth in the fourth quarter following a year of investment.
The company, which is awaiting a verdict from UK regulators over whether Rupert Murdoch’s 21st Century Fox can buy out the remaining 61% of Sky that it doesn’t already own, reported a full-year adjusted operating profit in line with forecasts, down 6% to £1.47B ($1.9B) due to a hike in costs for the British Premier League soccer rights. Operating profit increased 8% to £455M ($598M in the fourth quarter while full-year revenue was up 10% to £12.9B ($16.9B).
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“As we exit a year of investment, we returned to profit growth in the fourth quarter,” said Sky CEO Jeremy Darroch in a statement.
Looking ahead, Darroch outlined plans for growth for the year. “We will be increasing investment in Sky originals by 25% as we build on our track record for producing world-class entertainment,” he said. “We will make the customer experience ever better as we roll out Sky Q to Italy, Germany and Austria while also launching Sky Q without the need for a satellite dish.”
He added: “We will continue to identify opportunities to reach new customers through the recently launched portfolio of channels and pricing to drive growth in Sky Sports UK and we intend to launch a simple and affordable OTT service in Spain. We will do all this while continuing to execute against our operating efficiency plans.”
Darroch pointed to local dramas such as Babylon Berlin in Germany and Britannia in the UK in addition to the third season of Italian crime drama Gomorrah which “illustrate our strength in local programming that other SVOD providers cannot match.”
“We are already working on our first major co-production under our new agreement with HBO, a big budget drama documenting the true story behind the Chernobyl disaster, which we will air in 2019,” he said.
Sky added 35,000 customers in the UK and Ireland in Q4, down from 93,000 customers compared to the same period last year. The percentage of customers dropping the service sat at 12.6% in Germany and Austria, 11.5% in UK and Ireland, both higher than normal.
Darroch said that Sky’s growth and development for 2017 was “strong” and that operating profit was “excellent” and pointed to “particularly strong” results in Germany, Austria and Italy where operating profit increased by £115M.
“We have driven a 10% increase in revenue on a comparable 52 week basis to £12.9B despite market headwinds,” he said.
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