Sky Television may have to consider raising the price of its Sky Sport service in the next 18 months despite reporting a higher profit, chief executive Sophie Moloney has warned.
The company reported that it had more than trebled its net profit to just under $40m for the six months to the end of December, in line with an earnings upgrade it posted in February.
But the result was affected in multiple ways by the Covid crisis.
While Moloney trumpeted a reduction in the loss of satellite television customers as a sign the business was stabilising, she stopped short of claiming the result represented a turnaround.
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Earlier this month Sky TV upgraded its profit forecast for the full year for a second time, forecasting an annual net profit of between $37.5m and $45m for the year to June 30.
That forecast remained in place when it released its interim results on Tuesday.
Taken together, the interim result and the forecast suggest Sky may only achieve a break-even result for the second half of the financial year, though Moloney said it aimed to do slightly better than that.
Sky TV will begin selling broadband to targeted customers soon, says Sky TV chief executive Sophie Moloney.
The main new pressure on Sky is expected to come from higher programming costs, including the higher costs of its new rights agreement with rugby union body Sanzaar which kicked-in in January.
Moloney said that while 2020 had not been a year to push through price increases, it would have to look again the price of Sky Sports either later this year, or in the first half of next year.
Any changes would be carefully considered, she told Stuff.
She said on a conference call to analysts that any price change would be part of an overall review of its pricing and packages and would not take effect before its new financial year which begins in July.
The disruptions created by Covid were a double-edged sword on Skys finances in the six months to the end of December.
They contributed to a reduction in Skys revenues, which fell 7 per cent to $360m, but also to an 18 per cent reduction in its operating expenses to $243m as fees paid to sports bodies fell and production costs were avoided.
Sky told the NZX only about 42 per cent of its $52m cost drop represented permanent savings that it could expect to be repeated in future periods.
The number of Sky box customers fell 1.8 per cent during the half year, which the company described as a significant improvement from the 3.2 per cent decline in the same period in 2019.
We are seeing strong evidence that we are reaching a stable core of Sky box customers, Moloney said.
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The higher costs of Skys latest rugby rights deal started to kick in at the start of the year, so werent reflected in the profit result it reported on Tuesday.
But total revenues from those customers fell at the much faster rate of 9 per cent, reflecting a drop in their average monthly bills of about $4.
Moloney said about $2.50 of that fall in average bills was due to one-offs.
These included the cost of a promotion to encourage 32,000 customers who had accessed Sky through Vodafone to re-sign directly with Sky, the revenue impact of the discontinuation of its Skywatch magazine, and an expected one-off drop in sport subscribers and sports pay-per-view revenues.
Tackling the other $1.50 potentially-ongoing decline in Skys average monthly satellite bills was a top priority, Moloney said.
She reiterated Sky planned to launch a new set-top box but did not commit to a timeframe, noting there was a global shortage of chipsets.
Sky had previously indicated the new box would be available next year.
Surveys Sky carried out with customers suggest the new box will be able to show programmes in 4K.
It may be able to be controlled using spoken commands, in addition to via a traditional remote.
Moloney said the box needed to bring about a step-change in the ease with which people could access Skys content but said surveys indicated integration with internet pay-TV services such as Netflix was not a top priority for customers.
It has to move the dial for our customers which is why we are doing a bit more research before taking the business case back to our board, she said.
Sky previously has quizzed customers on whether they would be willing to pay $199 for the device.
Moloney said Sky expected to launch its long-touted broadband service in the coming weeks and would start selling that service to targeted customers shortly.
Sky shares were trading up 1.6 per cent at 18.5c in mid-morning trading in the wake of the profit result.
