After more than six months of delays, the rollout of the new Sky Box ($200 upfront) and Sky Pod ($100 upfront) is finally under way, with customers of the shuttered Vodafone TV getting priority. The new Sky Box supports Google speech commands, and supports Netflix, Disney+, Amazon Prime and any other app available via Google's app store. Photo / File
After more than six months of delays, Sky TV has begun the rollout its new hardware: The new Sky Box ($200 upfront) and the Sky Pod ($100 upfront).
Sky chief executive Sophie Moloney - talking to the Herald after her firm delivered its half-year result - says the initial focus is getting the new hardware to customers of Vodafone TV, which is set to close (after a couple of stays of execution) on March 31.
Vodafone TV had around 100,000 customers at the time its closure was flagged in mid-2022, with around two-thirds using it for free-to-air TV and apps only, and around a third using it to access Sky channels (under a wholesale deal between Vodafone and Sky).
Once the VTV crowd is catered for, the attention will turn to Sky customers who’ve registered their interest in the new Sky Box and Pod. The assumption is that this group (of undisclosed size) will be relatively comfortable with the new setup, which sees Sky’s channels shoulder-to-shoulder with streaming apps such as Netflix, Disney+, YouTube, Amazon’s Prime Video and, for the last months of its existence, Spark Sport.
Then the broader rollout will commence to the half a million households who use Sky’s current decoder.
There will be tiered loyalty discounts. “Those who’ve been with us 30 years, they certainly shouldn’t be needing to pay. And then it steps down, depending on whether you’ve been with us five, 10, 15, 20 years,” Moloney says. The discounts will be delivered through the Sky Rewards programme.
All up, Sky will be shifting around 30,000 Vodafone TV users and up to 517,000 users of today’s Sky decoder to the new Sky Box and Sky Pod.
That’s a lot of customers. It will be biggest launch since its MySky recorder in 2005, even allowing for the fact they’ll be no forced upgrade; those who’re happy with the current decoder can keep it.
So is it the worst time to be offshoring helpdesk jobs to Manila?
Earlier this week, Sky said it’s consulting on a restructure - as part of a broader drive to save $35 million - that would see 170 local jobs axed - 80 in customer care and 90 in technology and content operations - as roles go to the Philippines and India.
Moloney says consultation could wrap up early next month, and the change could be in place by mid-next month - accelerated by the fact that Sky already works locally with its potential Philippines partner, Probe CX Group. “We’ve already done deep reviews and due diligence,” Moloney says.
The CEO says the new Sky Box is the very reason that its helpdesk operations are being rejigged.
The company knew it needed more hands on deck for the rollout and the restructuring is the way to achieve it.
Today, Sky has around 180 helpdesk staff, all in NZ. Post-restructure, it will have fewer in NZ (100) but around 300 overall after hiring 200 in the Philippines through Probe.
Moloney says the 100 NZ-based staff will handle the gnarlier helpdesk calls. And, more broadly, she says “Covid taught us we can do this. You can be in different locations but still feel incredibly connected. So that’s the outcome we’re trying to achieve.”
The offshoring and layoffs will save “millions” Moloney says. The balance of the $35m in cost-cutting will come from right across the organisation.
Moloney says cost reductions will be delivered in some areas of programming, where Sky is now “super comfortable” with sharing rights rather than paying through the nose for exclusive dibs on content. For example, while Sky took Formula 1 rights back from Spark Sport, motorsport fans now have the option of watching either via Sky or via Formula 1′s global streaming service.
This new approach has limits, however - most bluntly with sport. For example, while key games in next year’s Rugby World Cup will be available free-to-air, Sky will be the only avenue for those who want to see every match.
Sky will also produce more original content like Laura McGoldrick’s The Woman’s Game.
Earlier today, Sky reported its total customers grew from 991,000 to 1.05 million for the six months to December 31 as a dip in Sky Box customers (from 530,000 to 517,000) was offset by a gain in people using streaming services.
Between them, Neon and Sky Sport jumped from 436,000 to 506,000 active subscribers.
The total includes subscribers to Sky Broadband (provisioned by 2degrees), whose numbers doubled to 23,000.
Despite the buoyant customer numbers, shares fell 3.2 per cent to $2.44 in early trading on a profit fall and narrowed full-year operating earnings outlook.
Net profit dipped from the year-ago $28m to $26m on rising costs - including some $7m on what Jarden analysts Arie Dekker and Vishal Bhula called “Keeping the lights on at Vodafone TV” - whose closure, and transfer of customers to wholesale partner Sky was delayed by months due to the Sky’s new hardware being behind schedule. (The pair called it a “solid” result overall and maintained their neutral rating. They expressed a preference for Sky salting away its $55m in cash for future rights deals amid the broadcaster’s push to return capital to investors).
Ebitda fell 14 per cent from the year-ago $85m to $74m.
But Sky said it was still on track to meet its full-year net profit guidance of $55-$60m.
The aforementioned drive to cut $35m in costs, including 170 layoffs, is underway to achieve that aim.
Revenue edged up from the year-ago $372m to $379m as the average monthly revenue per Sky Box customer increased from $79 to $81 and Neon revenue jumped after a 12.5 per cent price rise to $17.99 in August.
Overall, average monthly revenue across Neon and Sky Sport Now rose 8 per cent, with the Neon price rise plus more customers over both streaming services opting for an annual subscription.
Advertising revenue jumped 12 per cent to $26m for the half, a return to pre-Covid levels.
Although Sky Box connections fell 5 per cent, Sky Box revenue increased over the half-year for the first time since 2014.
Sky said it now expects full-year revenue to be $750m to $760m, from its previous guidance of $750m to $770m.
It also lowered its full-year ebitda range from its previous forecast of $150m to $170m to $150m to $160m.
A 6 cents per share dividend was declared in line with previous guidance. Sky also increased its full-year dividend guidance from a $17m to $23m profit payout to $20m to $23m. A 15cps full-year payout is forecast. Ther dividend returned after a long hiatus in the second-half of FY2022 with a 7.3cps payout (totalling $12.8m), while $70m was returned to shareholders in November 2022 through a Court Approved Scheme.
A $15m share buyback was announced, representing 15 per cent of shares on issue.
“Sky’s shares are considerably under-priced, despite the significantly improved outlook for the business and the board’s decisive moves on capital management,” chairman Phillip Bowman said.
A $150m credit line remained undrawn.
After more than six months of delays - blamed on everything from pandemic supply chain issues, the war in Ukraine and last-minute tweaking - Sky has now begun the rollout of its new Sky Box ($200 upfront) and Sky Pod ($100 upfront), with ex-Vodafone TV customers receiving early units.
Capex increased 114 per cent to $40.2m with the rollout of the new hardware, as previously flagged.
The move was a sting in the tail after Sky’s full-year FY2022 result, delivered on November 2, when CEO Sophie Moloney announced chunky pay rises for all staff.
“We are very mindful of the economic headwinds that we are all facing and the importance of securing key talent in these times impacted by scarcity of labour,” Moloney said.
“To tackle this head-on, we have just announced our salary review which included an increase of 8 per cent for those earning less than $100,000 a year, and 5 per cent for those earning up to $250,000.”
Earlier, Sky moved to boost revenue for the second half of FY2023.
With Spark Sport vanquished (TVNZ will pick up its content from June) and increases in rights costs (from inflation and the addition of Formula 1 and the English Premier League), Sky revealed in mid-January it was increasing the costs of Sky Sport by $3 per month from March 1, and the price of its Sky Sport Now streaming app by $5 per month from the same date.
Sky TV shares closed Wednesday at $2.52.
The stock is down 5.41 per cent over the past year.