Sky throws down gauntlet

net1

Agencies yesterday warned Sky may leverage its ever-growing power to up the price of airtime.

The concerns followed chief executive Tony Ball’s announcement that the satellite giant, after its first full year of profit since 1998, was just weeks away from surpassing its target for the year of reaching seven million subscribers.

While Sky’s platform is becoming more attractive to clients as its share of the TV audience grows, the sting in the tail for agencies and their clients will come, if, as many were predicting this week, Sky uses its success to try to start charging higher advertising rates.

One analyst said: “BSkyB will seek to charge a premium for ad sales over time if their audience continues to grow. They will seek to reduce the discount they sell against ITV and Channel 4.”

Dave Jowett, deputy broadcast director at MediaCom, added: “Sky does have some leverage over time to put its cost per thousands up if their audience share continues to grow.”

MPG broadcast director Andrew Canter said: “If you’ve got a strong product that everyone else wants, then you can put your price up,” but added that he doesn’t think this will happen within the next year.

“In two or three years when the penetration of multi-channel reaches 60%, then that will be an issue,” he said.

Sky sells airtime for its own channels, as well as a string of others including Discovery Networks and Emap’s music channels.

Ammunition likely to be used by agencies to hit back at Sky, should it try to up its rates, is the performance of its own channels, most notably flagship Sky One.

Bobby Din, business director at MindShare, said that he expects Sky to try to put its ad rates up, but added that Sky One was an issue. “They’ll have a hard time getting advertisers to increase investment for a product that’s under performing,” he said.

Barb figures show that during the first six months of 2003, Sky One’s total audience delivery dropped by 12% compared to the same period last year, although the figure does not include the recently launched Sky One Mix.

Dawn Airey was poached from Five by Ball at the end of last year to address Sky’s programming weaknesses.

Since her arrival, it has added to its advertising bargaining power by launching four new channels – Sky One Mix and the three music stations Flaunt, the Amp and Scuzz.

sky digital gained 133,000 new customers in the three months to June and now has 6.8 million customers.

And its growing importance as an advertising platform is underlined by research suggesting that over the past three years the proportion of adult 16-34 impacts delivered by multichannel has risen from 24% to 34%.

Sky, which returned an annual pre-tax profit of £260m over the 12 months to June, compared to losses of £22m the previous year, is also planning a major advertising push for both its Sky+ personal video recorder product and a freshly-branded version of its movie channels in the run up to Christmas.

A higher rate card, however, would see advertisers, already facing the prospect of a more expensive ITV through one sales point should the merger of Carlton and Granada get the goahead from the Competition Commission, facing a new threat.

Ball this week credited “strong agency share deals” as a major factor behind Sky’s performance, which has seen a 13% hike in advertising revenue to £284m.

However, many industry insiders expect those same agencies to face tougher negotiations with Sky in the future.

Sky has already demonstrated a more ruthless approach towards other media owners, slashing the amount it pays to third party channels, such as Viacoms’ MTV and Emap’s The Box by up to 25%.

A Sky spokesman refused to comment on the future of its rate card and said: “Sky offers high quality audiences in attractive demographics and our audience share continues to grow.”

flyinhaggis

i think sky now has breached the 7 million customer mark and also one of their goals is to have all their subscribers paying £400 a year for their viewing so ive heard RumOur of

rolfw

More than rumour, was reported on both points in this section some while ago, both confirmed by BSkyB.

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stealthpirate

Daft really, the price of white goods has fallen, things like broadband and other stuff, yet sky keep banging a quid on here and there....
The only way to cap it is to cancel......millions at once

gameboy

Thread started in 2003 and nothing changes - still complaining about S*y charges?

I still think if they cut the subscription charged the number of subscribers would continue to rise faster...

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Only he who does nothing, does nothing wrong.

stealthpirate

True mate, instead it's the opposite that happens, a few 100 thou jack sky 'cos of price hikes, loss gets loaded on existing punters!....
Think about it if 1 person cancels their 36 quid a month package, that 36 quid has to be clawed back from somewhere!.... thousands do it, another 50p added on next year.

jimbo

TPS package on 13e is £385 per year and doesn't include Multivision or TPS Foot. I think it makes S*y seem a bargain.

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Jimbo

Yeshi

Since when is tps chargeable??? oh yeah sorry Doh!

Look at NTL, Telewest.. Homecall?? All have sky channels.. all charge sky high prices.. simply because sky charge them to provide the channels..

Homecall is a little different.. it has obtained rights to channels direct, instead of loaning all of skys channels.. looking at their platform allot of the channels are not sky owned .. although they have a few... not allot..

NTL doesnt break even with its tv audiance, 2 reasons... N1 and paying sky.. only reason theyre afloat is because of its flagship internet service.. which until recently was free to many cloners.. i think personaly the govt should step in and stop the monopoly.. after all who wants to pay £40 a month i mean who wants to watch repeats of the bill for the next 10 years.. or re runs of Livings most haunted..

If homecall was avail in my area.. i would shoot at the chance to have it.. Down the phoneline and all that

Channel Hopper

Sky looking to increase charges ?
Well it is the beginning of the year.
Move along, nothing to see here.

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There is a very fine line between "hobby" and "mental illness"

BarMoo

Ah, Value Pack GBP 7.00 (that's seven pounds)

Those were the days.

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Have Fun, Moo.

BarMoo

Oh crap, the next thing I found in my SKY folder.

CH - you we're a baby back then (125 posts, ahh) - you have put on a few pixels since then, hehe.





Have Fun,

Mark.

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Have Fun, Moo.

Channel Hopper

I havent aged a bit

Somethings dont change in the industry

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There is a very fine line between "hobby" and "mental illness"