Sky has "paid the price for the steep inflation in live football rights" as it suffered a 9% drop in operating profits in the past six months, according to David Bond of the FINANCIAL TIMES. The European pay-TV broadcaster paid £4.2B ($5.3B) for the latest three-year deal to show live Premier League football -- a 70% jump on the previous agreement. The new contract, which started in August, led to a £314M ($396M) "step-up" in Premier League costs in the six months to December. That "drove operating profits down" to £679M ($856.2M), a fall of £65M ($82M) compared with the same period in '15. Sky "was also hit by an increase in the rate of churn." The rate rose to 11.6%, from 10.2% for the same period in '15, "leading some analysts to flag concerns about Sky’s underlying performance." Neil Campling of Northern Trust Capital Markets described the churn rate as "alarming," saying it was "the first time in more than five years" that Sky’s churn had exceeded 11% in the first half of a financial year (FT, 1/26). The BBC reported Sky said that its financial performance had been "good." Sky CEO Jeremy Darroch said, "In a year in which we are absorbing significantly higher programming costs, as a result of the step up in Premier League costs, our financial performance has been good." The company said that it had added more than 500,000 new customers (BBC, 1/26).
EMPHASIS ON RETENTION: REUTERS' Paul Sandle reported Sky plans to introduce a loyalty scheme to "stem a rise in customer defections" that, together with a jump in the cost of football broadcasting rights, "cast a shadow over first-half results." Darroch said that Sky needs to do "a better job across the board" to hold on to customers, adding that British customers who had taken its services for a number of years "would be offered package upgrades and other benefits," replicating a loyalty program it has in Italy. Darroch said that BT's woes "did not change his strategy" toward the forthcoming auction. He said, "We go into all the rights renewals this year in a good place. We have good optionality around where we spend our money. We'll spend where we see value; we are good at assessing that" (REUTERS, 1/26).
