Business Q&A: Sky’s the limit

Jeremy Darroch, BSkyB CEO

Jeremy Darroch, BSkyB CEO

These are your first set of results as chief executive of BSkyB.
What’s your take?

I’m pleased with the results that we’ve posted. I think the business did well
over the second quarter.

We have continued to grow our total number of gross customers, net customer
additions were up in line with our target of getting to ten million by the end
of the decade and we’re continuing to see a higher propensity of new products
throughout the base, so almost one in two customers now take more than one
product from us.

Sky Plus in particular did very well, we’re leading the market in broadband
and fixed line telephony. Sky One, Sky Movies and Sky Sports all had very, very
strong Christmases. And financially the business is on track as well.

But picking you up on some of the detail, looking at the gross
additions ­ 385,000 ­ that looks a little bit on the low side. What does this
say about the competitive landscape out there and the cyclicality of your

I think the overall backdrop that we operate in is a combination of what the
competition are doing, the general economic environment (which, as you have
heard from many others, was a bit more challenging over Christmas), but also our
own approach to the market.

We took a decision 12 months ago to focus very much on the quality of new
customers. And that’s meant that we have dramatically reduced the level of
viewing package discounts that we offer today versus a year ago.

So just to be clear then, you mentioned the ten million subscriber
target by 2010 and the kind of average revenue per user growth figures that we
are looking at. Even in these tougher economic times, the targets still stand,
do they?

Yes, they do.

And to what extent were the first half profits impacted by headwinds,
like the Premier League contract and your basic channels coming off the Virgin
Media platform?

Quite significantly. In the first half that affected us to the order of £75m,
the bulk of that was the Premier League contract but also the non-carriage of
our channels on Virgin had an effect as well.

As we move to the second half, the Premier League effect will stay this year
but we’ll gradually see the Virgin effect in the base, and therefore year on
year we’ll see profit growth accelerate as we come out of this financial year
and then into 2009.

Average Revenue Per User is up 7% at £421. How much further do you
think there is to go if we put all this together in terms of ARPU?

There’s no reason at all why ARPU can’t continue to grow pretty consistently
from here on in. We certainly saw very strong growth in the first half of this
year. The rate of growth will ameliorate in the second half of this year.

But thereafter as we continue to get more customers to take more and we widen
our product set and from time to time we take pricing as well, then we should be
able to see ARPU continue to increase over time.

But it’s still a very, very competitive market out there. So what’s
your strategy for staying ahead of the competition? Is it the programming side?
Or is it technology?

Well, we’ve done well as a business over a long period of time by staying
very focused on the marketplaces that we operate in and on our customers. And so
we’ll continue to do that.

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