Sky Network Television is holding on to its strong position in sport broadcasting and is pleased with how the Rio Olympics rated.
Sky TV reported a 15 per cent fall in tax-paid profit for the year to June 30 of $146.7 million.
Sky attributed part of the drop in profit to the costs associated with its bid to merge operations with Vodafone New Zealand.
Revenues were flat at $928.2m, a 0.1 per cent increase on the previous year.
Some $14.4m of one-off costs incurred in relation to the planned merger, which is structured as a takeover of Vodafone NZ by Sky, came straight off the bottom. Underlying profit of $157m compares with a $171.8m net profit in the previous year.
Chief executive John Fellet said viewer numbers for Rio Olympics were initially disappointing, but picked up midway through the first week of broadcasting.
Sky recorded 10.6 million viewers on free-to-air Prime, 17.9 million viewer hours on traditional Sky TV and 13.3 million viewer hours on Over-the-top Sky, which includes streaming platforms like Fanpass, Sky Go and its dedicated Olympics app.
"We were able to use technology to extend the content to more people and more hours, which is the whole key to amortising the cost of these things as they go up," Fellet said.
New broadcasting deals with NRL, netball and golf have been secured for Sky, and it will be broadcasting the EPL. This maintains Sky's position as the home of sport.
"Our goal is always to have a wide selection [of sport] so there's always something to watch at all times."
The broadcaster increased subscriber numbers over the year to 852,679, although customer churn rose to 17.5 per cent from 14.5 per cent.
On the surface it sounds like a great idea... unfortunately we downloaded also a font that certain individuals could not see well.
The churn rate from November 2015, after the Rugby World Cup, to March this year was higher than ever recorded for Sky.
Fellet said the summer after a Rugby World Cup when the All Blacks skip a northern hemisphere tour is always a time of high churn, but the added competition from streaming services like Lightbox and Netflix intensified the churn rate.
He said Sky "scored an own goal" by releasing a software update that users could download to upgrade their MySky boxes and give access to OnDemand content.
"On the surface it sounds like a great idea... unfortunately we downloaded also a font that certain individuals could not see well."
Fellet thought in the time it took to get that font fixed they experienced customer churn.
In a lot of industries, competition normally results in a price war. In the content industry, it becomes an arms race.
The other major source of additional cost during the year was for programming, chief executive John Fellet said in a letter to shareholders.
"In a lot of industries, competition normally results in a price war," he said. "In the content industry, it becomes an arms race."
Fellet acknowledged that "the launch of numerous new business models" for broadcast content has "challenged incumbent players both in New Zealand and around the world".
The company declared a final dividend of 15 cents per share, payable September 16 with record date of September 9.
The shares last traded at $4.69, up 2.2 per cent so far this year.
- with BusinessDesk