LONDON (Reuters) – British media companies BSkyB, TalkTalk and ITV are switching on new services to boost customer loyalty and spend as a weakening economy depresses advertising and new subscribers prove hard to find.
BSkyB’s focus on selling extra services to its existing customers helped the satellite broadcaster to post record full-year profits on Thursday. Adjusted operating profit was 1.2 billion pounds ($1.86 billion), up 14 percent on the previous year, thanks in part to more of its pay-TV customers taking its broadband and telephone services.
Despite difficulties attracting new customers, new sales to existing BSkyB subscribers enabled the group to lift average revenue per user to 548 pounds. It added 57,000 new Sky households in the quarter, with 20,000 taking the core TV product.
Chief executive Jeremy Darroch said it was hard to see any short-term improvement in the British economy, but he was focusing on long-term growth rather than quarterly figures.
“We’ve continued to add new households and existing customers are remaining loyal and taking more products from us,” he said.
Analyst Patrick Yau at Peel Hunt said it was a solid full-year statement, indicating good progress as the company launched new products to drive customer retention.
“In particular, we note the 21 percent increase in the triple-play customer base (now up to 3.4 million), showing continuing traction with the up-sell strategy,” he said.
Investors were also cheered by a further 500 million pounds buyback. The shares had gained 2.2 percent by 1021 GMT to 700 pence.
GOOD TO TALK, BETTER TO WATCH
TalkTalk, which competes with BSkyB in broadband, has turned to the broadcaster to provide premium sport and film channels for its first TV package, which it unveiled on Thursday.
It hopes its offer of catch-up programming, on-demand films and access to BSkyB channels will accelerate customer growth, which turned positive in June, and help it shed its reputation for poor service.
“When we started on the (digital on-demand and catch-up) YouView joint venture our ambition was to become a quad play provider: to move from selling phone and broadband to phone, broadband TV and mobile,” chief executive Dido Harding said in an interview. “This is a really big step on that journey.”
The company, which also competes with BT and Virgin Media, is offer a free YouView set-top box initially to customers on its Plus package.
Harding said the return to subscriber growth in June, after wet weather hampered connections earlier in the year, was a great base from which to launch a groundbreaking TV service.
“This is TalkTalk at its disruptive best,” she said.
The group’s total broadband base fell by 125,000 in its first quarter against the same period a year ago to 4.05 million, while total revenue declined by 2 percent to 414 million pounds.
ITV, Britain’s biggest free-to-air commercial broadcaster, is reducing its reliance on volatile ad markets by increasing in-house production activity and its online offer.
Advertising revenues, which remain the company’s biggest source of income, rose 3 percent in the first half, but it said the gain would be wiped out over the summer, when many viewers are expected to turn to Olympics coverage on the rival BBC.
The broadcaster, home to soap opera Coronation Street and period drama Downton Abbey, said it expected ad revenue to be down 10 percent in July, 11 percent in August and between flat and down 5 percent in September, resulting in a broadly flat performance for the first nine months.
Chief executive Adam Crozier said he remained cautious about the TV advertising market for the rest of 2012, but he expected to outperform the market over the year.
He said that revenue from its in-house production arm, up 34 percent in the first half, and from online, pay and interactive services, up 24 percent, was driving growth.
“The 106 million pound increase in non-advertising revenues – from content, pay and online – is further evidence that our strategy of rebalancing the business and growing new revenue streams is working,” he said.
Shares in the company, which beat market expectations with a 15 percent rise in first-half pretax profit to 235 million pounds and doubled its interim dividend to 0.8 pence, were up 7.7 percent to 77 pence.
Analysts at Investec said the outlook for third-quarter ad revenues was as bad as expected, but it was to some extent offset by the performance of production arm ITV Studios.
“Good management activity and actions, but we are negative on broadcast long term,” they said.
(Additional reporting by Kate Holton- Editing by Rosalind Russell)