Sky's profits fell 11% in the nine months to the end of March as the European broadcaster "continued to be hit by the rising costs of live Premier League football," according to David Bond of the FINANCIAL TIMES. A £494M ($633M) increase in the cost of the rights caused operating profits to fall to £1.01B ($1.29B), down from £1.14B in the same period last year, "reflecting the fierce competition to show exclusive football games from rival BT." Sky CEO Jeremy Darroch said that the drop was "bang in line" with the company's plan for '17. The rise in costs was "largely offset by efficiency savings and revenue growth," the company said. The "slide in profits" comes as U.K. communications regulator Ofcom considers 21st Century Fox's £11.7B ($15B) bid for the 61% of Sky which it does not already own. Darroch declined to comment on Ofcom's ongoing inquiries. Sky said that it increased revenues during the period by 5% on a constant currency basis to £9.6B ($12.3B), despite a 3% fall in advertising revenue in its core business in the U.K. The company said that it "outperformed the rest of the British TV advertising market," which was down by about 8% in the first quarter (FT, 4/20). In London, Sam Dean reported Sky added 769,000 customers in the last nine months, with 100,000 new customers in the third quarter. It also reported "strong profit growth in its Italian division," where profits were up by £64M ($82M) to £91M ($116.6M), and Germany and Austria, where it reported a £4M ($5.1M) profit compared to a £39M loss in the same period last year (TELEGRAPH, 4/20).
BATTLING NETFLIX: In London, Alexandra Frean reported Sky joined HBO to form a $250M global drama production joint venture as it "battles the rising popularity" of online TV services such as Netflix and Amazon Prime. The broadcaster made the announcement as it reported its 5% increase in revenues. The co-production deal with HBO to produce "high-end drama" comes as U.S. groups Netflix and Amazon are "spending huge sums on quality shows to lure viewers" from traditional TV channels. Netflix said that it plans to spend $6B on content this year and analysts at JP Morgan expect Amazon to spend $4.5B on video this year. Darroch said that the HBO deal would provide Sky with "a slate of shows that could be exploited in Sky's home markets and beyond." He anticipates two drama series, with "international points of view and casting," coming from the deal every year. The first is expected next year (LONDON TIMES, 4/20).
