Sky Television chief executive John Fellet has been given a 7.6 per cent pay rise after a record net profit for the year to June 30 with a package of $1.8 million according to the company annual report issued today.

Some of the pay is understood to be performance based. Last year the company recorded a 22 per cent increase in profit to June 30 at $164.1 million.

This year has seen the advent of subscription video on demand competitors such as Spark's "Lightbox" with the prospect of more to come.

Sky is planning to launch its own new SVOD service before the end of the year.

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Fellet cautioned that the strength of the dollar had for the past five years masked an underlying rise in content costs that had been driven by competition between broadcasters.

"Since most international content is priced in US dollars, expect greater headwinds as the New Zealand dollar starts to return to long-term averages with the US dollar," he told shareholders.

Its share of television viewing has risen from 28.7 per cent to to 29.4 per cent.

Fellet said: "To continue to grow SKY must look at evaluating and potentially launching new business models. This process

started with the purchase of our online DVD delivery business called DVD Unlimited. It continued when we

launched IGLOO which is designed to offer no frills prepay television,

"All of these business models face the primary challenge of the limited New Zealand population." he said.