BSkyB posts solid 4th quarter profit as recession-hit consumers enjoy home entertainment

BSkyB makes profit, helped by homebound consumers

LONDON — Satellite TV service British Sky Broadcasting Group PLC posted a solid fourth-quarter net profit on Thursday as more consumers turned to home entertainment in the recession — drawing the company closer to its target of 10 million subscribers by 2010.

Even with a potential increase in competition, BSkyB said it was confident of growing the business further as new customers respond to its price cuts and promotions for its high definition TV service — joining up at the fastest rate in years.

BSkyB, which is 39 percent owned by Rupert Murdoch’s News Corp., booked a net profit of 90 million pounds ($148 million) in the three months to June 30, compared with a loss of 9 million pounds a year ago.

Revenue jumped 9 percent to 1.36 billion pounds, from 1.25 billion pounds, making Sky one of the few businesses in Britain to gain from the economic downturn as consumers choose to spend more time at home amid tough economic conditions.

The broadcaster sought to capitalize on demand for High Definition services by slashing the cost of its service box to 49 pounds from 150 pounds.

The gamble paid off, with the broadcaster adding 124,000 net new subscribers in the final quarter of the year as people splashed out on on home entertainment, giving it a total of 9.4 million.

BSkyB Chief Executive Jeremy Darroch said that new customers were joining the company at the fastest rate for five years, while existing customers were signing up for more products than ever before.

“We see a substantial opportunity ahead for our business,” said Darroch.

The company’s share price rose 5.2 percent to close at 546 pence on the London Stock Exchange.

Hargreaves Lansdown analyst Richard Hunter said that “the spectres of fierce competition and rising unemployment both drag on prospects, but Sky continues to deliver in a marketplace in which it has pre-eminent experience.”

Hunter said that BSkyB’s shares “remain a cautious buy in terms of the general market view.”

Net profit was 259 million pounds for the year to June 30, compared to a 127 million pound loss last year. Revenue was up 8 percent at 5.36 billion pounds, from 4.95 billion pounds last year.

The company is expected to benefit from the demise of Irish broadcaster Setanta Sports, which filed for bankruptcy protection earlier this month.

Sky made a successful joint bid with Walt Disney Co.-owned ESPN to broadcast Scottish Premier League football. But ESPN also picked up the rights to 46 live top-flight English matches in Britain, along with the Scottish fixtures, giving it a foothold as a competitor.

Sky is also facing a number of regulatory battles, with the fate of its 17.9 percent stake in rival broadcaster ITV PLC yet to be decided.

Sky has already lost one appeal against the government’s decision to force it to reduce the stake, which it picked up in 2006 in a move widely perceived to be a blocking strategy against its pay-TV rival NTL Inc. — now called Virgin Media after a merger with Richard Branson’s Virgin Mobile.

Another round of legal action by both sides is scheduled for October.

Darroch has also indicated he is prepared to fight a recommendation by market regulator Ofcom that Sky be forced to share some of its premium content with competitors, including Virgin.

The company said Thursday if Ofcom goes ahead and implements the proposals after a consultation period that ends in September, it will “the available options,” including legal action.