BSKYB issued a statement of intent to potential bidder News Corp yesterday when it announced it has broken through the 10m subscribers barrier.
With Sky’s board said to be determined to play hardball with Rupert Murdoch’s News Corp, its swelling subscriber base will prove a powerful bargaining tool.
But analysts are already questioning how far Sky can continue to grow, with the firm already claiming to have a penetration of 36 per cent of UK households.
Sky’s customer growth rate in the last quarter dropped back to 2006 levels after a surge in demand created by its HD offerings pushed it to record levels last year.
Sky chief executive Jeremy Darroch claims the firm now has “more ways to grow than ever”, pointing to innovations such as 3D TV. But demand for this technology has been patchy (Sky has not yet released any figures) and its long-term success is far from guaranteed, especially while it still requires special glasses.
Moreover, Sky could soon face the biggest challenge to its dominance since Freeview brought multi-channel TV into almost every home in the country, with no monthly charge, back in 2002. YouView, the BBC backed venture, looks set to launch its online TV platform in the second quarter next year, allowing customers to stream HD TV from the internet.
Without another “game changing” innovation like HD, it seems inevitable Sky’s growth rate will drop.
Enders analyst Toby Syfret sees the broadcast giant continuing to add subscribers until it hits a glass ceiling of between 11 and 11.5m.
He told City A.M.: “A slowdown is inevitable but I don’t think there is anyone who can touch Sky at the moment. It is still growing and will continue to do so for the time being, unlike satellite TV in other markets, including Sky’s Italian venture.”
He added: “But it will gradually decline. As its scale increases it is more affected by churn [customers leaving for other providers] and its 3D technology is as yet unproven.”
But Sky has other ideas. It believes the Pay TV market has the potential to expand from the current 50 per cent of households to closer to 80 per cent – the level seen in the US. It also points to its broadband offering – the fastest growing in the UK, which has the potential to pull in more customers.
Adding to a subscriber base of 10m is a tall order. If anyone can do it, it is Sky.
TIME LINE | THE RISE AND RISE OF SKY
News Corp launches Sky in the UK.
Sky merges with BCB to form BSkyB. It launches its first pay-as-you-go service. Large debt pushes News Corp close to bankruptcy, before lender Citibank steps in.
Sky Sports launches its first channe.
Sky signs £304m deal for exclusively live coverage of the new FA Premier League.
Around 17 per cent of BSkyB is floated on the UK and US stock exchanges.
BSkyB enters the FTSE 100 index.
Sky Digital launches the UK’s first digital TV service, with over 140 channels.
Sky passes the milestone of seven million customers in the UK.
Sky launches its broadband service.
Sky passes nine million customers.
News Corp bids for 61 per cent of Sky it doesn’t already own. Bid is rejected.
Sky reaches 10m customers.