Sky launches £10 ‘iPlayer’ box

BSkyB fought back against intensifying competition today by launching a £10 TV box allowing viewers to watch on-demand services.

The broadcaster unveiled the budget Now TV box, which can also give access to Sky Sports and Sky Movies, as it revealed a 12% jump in the number of products its customers take.

Subscriptions rose 3.3 million to 31.6 million in the year to the end of June, lifting pre-tax profits 6% to £1.26 billion, as customers increasingly add products including broadband, HD TV and Sky Go Extra.

Sky hailed a strong summer of sport, which has seen it broadcast Ashes cricket and Lions rugby, as well as Team Sky cyclist Chris Froome’s historic Tour de France win.

Sky is battling surging competition from rivals including BT, which launches its own sport channels next month in a head-on challenge to Sky’s dominance of pay-TV sport. BT’s channels will be free to its broadband subscribers and give viewers 38 Premier League football games a season.

Sky’s Now TV box costs £9.99 and wirelessly connects a TV to a broadband connection, giving contract-free access to BBC iPlayer, Demand 5, Sky News and Now TV. Through Now TV, viewers can also pay to watch Sky Sports and Sky Movies.

The device also allows people to catch up on previously-broadcast programmes - known as on-demand TV.

The Now TV device will also challenge the £299 YouView box, a joint venture between BT, TalkTalk, the BBC, ITV, Channel 4, Channel 5 and Arqiva which also offers on-demand TV for free.

Sky said 35% of its customers are now taking TV, broadband and phone services, up from 32% last year. That helped grow revenues 7% to £7.24 billion.

But its churn rate - how many customers are leaving - increased to 10.9% from 9.9%. Sky warned that it expects the year ahead to be challenging as consumer spending remains squeezed.

It also announced plans to buy back £500 million of shares to boost investor earnings.

Customer numbers were up 4%, or 552,000, to 14.8 million, of whom 11.2 million were retail customers.

Average revenues per user climbed £29 to £577 a year.

Chief executive Jeremy Darroch said: “We expect the consumer environment to remain challenging over the coming 12 months.

“Against that backdrop we have a strong set of plans that will extend our leadership in core areas - on screen, in home communications and in front-line service delivery; accelerate growth in new services; and improve efficiency to build a bigger, more profitable business for shareholders.”

Sky said it is expanding its Sky Go mobile TV service with another 10 channels. It is also adding 20 new channels to its catch-up TV service and upgrading its TV boxes to hold more content.

Sky said this investment is expected to hit operating profits by up to £70 million this financial year. It added profits will be broadly neutral in 2014/15 before rising in 2015/16.

Higher spending by households and businesses, plus its growing Sky Bet gambling business, helped drive the increase in group revenues.

But Sky said “cyclical” markets meant advertising revenues were flat at £440 million despite the Olympics occurring early in its financial year.

Shares were down 2% in early trading as the update underwhelmed investors.

BT yesterday revealed it has already signed up half a million customers to its sport channels ahead of their launch - although most of these were existing subscribers. It hopes to win over new customers and defectors from rivals once the Premier League season launches on August 17.