Sky TV says programming costs-to-revenue ratio likely to rise in 2016

See also: Sky welcomes internet challenges, will hold dividend payout

Sky Network Television [NZX: SKT], the country's dominant pay-TV company, says programming costs as a percentage of revenue will be at the top end of its historic range in 2016.

The programming costs-to-revenue ratio is likely to be in the 35% range for the 2016 financial year, up on its historical range of 30-33.5%, the company said in presentation slides for an investor day. Sky TV said it had recently increased its basic and sport tier pricing by $1.15 and $1.61 respectively, partly due to increasing content costs.

Sky chief executive John Fellet outlined three key developments for the pay-TV operator: the extended partnership with Vodafone announced earlier today to offer broadband through Sky; possibly providing its subscription video on demand service Neon to customers with both Sky Movie and SoHo subscriptions at no additional cost; and enhancing its Fan Pass online and on-demand subscription for certain sporting events to include online access to its Sky Sports linear channels. The last is an apparent response to competition from the likes of online TV company Coliseum, which has the rights to English Premier League games and PGA golf.

Sky TV's product pipeline also includes introducing an option for consumers to access Sky Sports channels through daily and weekly passes at $15 and $20 respectively.

The deal with Vodafone will see Sky customers get a $10 monthly discount off their Sky subscription if they sign up to one of Vodafone's broadband plans, tightening its existing relationship where customers can be billed for their Sky subscription on their Vodafone bill.

Mr Fellet said Sky was quickly realising there was two markets for paid content – its premium pay-TV service and standalone OTT (over the top) services delivered via the internet. In the medium term the pay TV operator is considering an option to converge Neon and Fan Pass into a single integrated OTT proposition.

He said Sky UK's approach was "of interest to us" where its internet TV service Now TV has helped drive subscriber growth.

Now TV was launched in July 2012, allowing consumers to watch some of Sky's exclusive content on a simple monthly contract without the need for any equipment installation. It started with movie content and later added sports and entertainment.

More recently, it launched a dedicated set-top or "puck" box that plugs into a HDMI port on a television set and allows access to the on-demand service and a range of other video on demand apps.

Another new development Sky this week said it was working on is allowing subscribers to scroll back in time through its television planner so they can watch programmes they missed. The reverse electronic programming guide feature is likely to be available next year.

Sky is also about to allow all MySky decoders to connect to the internet, giving access to content in either the traditional linear format or on an on-demand basis.

(BusinessDesk)