BSkyB, Britain's dominant pay-TV group, is to launch an online offering to enable it to better take on the likes of Lovefilm and Netflix, following some signs of slowing growth at its main satellite business.
BSkyB said today it would launch the new service to non-Sky customers, offering movies and sports without the need for a contract or satellite dish. BSkyB made the announcement as it revealed it had added 40,000 net new customers to its main TV service in the second quarter, slightly below expectations despite being helped by strong customer loyalty.
A spokeswoman for the company confirmed the new service would be available in Ireland as well as the UK.
With a strong focus on cost control and a new strategy of selling more products to existing customers, the group posted strong first-half results and increased its dividend.
Shares in BSkyB were up 3 per cent at 685.5 pence this morning, having fallen 11 per cent year to date over fears the group would have to invest in faster broadband services, spend heavily to acquire soccer rights and compete with the likes of Lovefilm.
BSkyB said instead of investing in its own fibre network it would use BT’s superfast infrastructure known as BT infinity on a wholesale basis to offer its customers speeds of 40 megabits per second. The faster broadband speeds, which have proved popular with customers of rival Virgin Media, could help complement BSkyB's push in watching more content online. BSkyB has offered its own customers the opportunity to watch programming online before, but the push to offer its content to non-Sky customers is a new tactic for the group.
It follows the recent launch of the US online DVD rental company Netflix in Britain and Ireland, which prompted Amazon-owned rival Lovefilm to offer a new cut-price service. BSkyB has not yet set out its pricing plans. The new offering will launch in the first half of 2012 and will enable customers to watch Sky content including movies and eventually sports on a range of flexible tariffs and without signing a contract.
BSkyB – which also said it would create 1,300 new jobs in Britain and Ireland in a drive to improve customer service – has grown through the economic downturn by attracting consumers to its range of sports, movies and broadband, but it has started to show signs of slowing in recent quarters.
The 40,000 net new customers added in the second quarter was above the 26,000 it added in the first quarter but below the 140,000 added in the second quarter a year ago. Analysts had expected net new TV customers of 58,000. To balance out the slowing growth it sold an increasing number of different services to existing customers, such as high-definition TV or broadband, enabling it to post strong first-half results.
Revenue was up 6 per cent to £3.4 billion and adjusted operating profit grew 16 per cent to £601 million. "Amidst all the Netflix noise comes a reminder that Sky is not about to give up its crown lightly," said Richard Hunter, head of equities at brokerage Hargreaves Lansdown. "The launch of its online offering further complements its existing technical reach alongside the potential for new customers."
Reuters
