KEY POINTS:
Sky Television has played down slowing subscription growth and increased churn rate, saying stay-at-home consumers will help Sky ride out the recession.
Chief executive John Fellet said the pay television company - 44 per cent owned by Rupert Murdoch's News Corp - was "sitting in the teeth of
recession" and the year to June 30 was the hardest Sky had seen.
Reporting annual results yesterday he played down the impact of the downturn limiting Sky subscriptions. And he insisted there are no signs the free-to-air digital television service Freeview - launched in April 2007 - is having an effect.
On the economy he said: "Our indication are that people are keeping their car an additional year before replacing it - or delaying decisions on appliances.
"But people are staying home rather than going out and that is holding up subscriptions."
Fellet announced mostly solid financial results for the year to June 30.
Net profit was up 25 per cent to $97.7 million. Growth slowed in the second half and with 37,000 additional subscribers, last year was the slowest in four years.
Churn rate - which measures the turnover of subscriptions - was up to 14.9 per cent from 13.4 per cent.
Sky's share of viewing numbers was up from 25 to 28 per cent. Ratings and ad revenue for its free-to-air channel Prime TV was up but overall advertising revenue rose just 2.2 per cent.
Fellet did not offer any profit guidance for the future saying no chief executive was keen to do that in the current environment. But he did mention two external factors with a potential impact on Sky.
One is the arrival of Freeview offering free-to-air-television and which claims to be a potential cap on Sky.
But Fellet sees no impact from Freeview in the 2007-08 results. "We keep a track on why people are leaving Sky and it has not come up in the top 20. In the end Freeview is focused on older people who are not Sky subscribers anyway," he said.
Freeview cannot provide up-to date estimates on people who have bought their set top boxes. But heavy marketing has been met with similar promotional campaigns for Sky, including free installations.
At yesterday's results briefing Fellet said the free installations were not permanent but such promotions had to take account of demand. While consumers were prepared to pay $149.95 or $99.95 to join Sky in the past, they were not now. The second issue mentioned was the launch this year of a Ministry for Culture and Heritage Review on broadcasting regulations - and the threat of an end to a broadcasting environment with few regulations.
"We did not say anything about regulation, but I'm not sure that there is anything we can say," said Fellet.
Market analysts are sceptical about new regulations.
Rob Mercer of Forsyth Barr said Freeview had too few channels to be any threat.
Sky and Freeview would grow in tandem and Sky had shown it was in a position to increase subscribers by 30,000 a year.
Sky is confident its new High Definition My Sky personal video recorder will improve the ARPU - or average revenue per user - from Sky subscribers. The MySky HDi set-top boxes include internet access which allows downloads of programming and increases potential revenue
Fellet said marketing was limited for its standard MySky unit because it knew about the technological shift.
Sky shares closed down 10c at $4.93.
SKY TV
Year to June 30
Revenue
2008 - $658.8m
2007 - $618.5m
Net profit
2008 - $97.7m
2007 - $77.9m
Subscriptions
2008 - 748,576
2007 - 711,211
Churn rate
2008 - 14.9 per cent
2007 - 13.4 per cent
Dividend
2008 - 14cps
2007 - 10cps
