Sky plans drama, OTT growth

Sky drama Riviera stars Julia Stiles

Sky will ramp up drama spending and launch an OTT service in Spain to defend itself from surging sports rights costs, which have driven the European satcaster’s annual operating profits down by 6%.

The UK-based company, which saw its bill for Premier League football rise by 83% in 2015, said operating profits to the end of June were down to £1.47bn from £1.56bn (US$2.05bn) in 2015/16.

The company has been slashing costs to cover the extra £629m it paid for rights to football but profits were also hit by its move into the UK mobile phone market. Costs of around £56m related to the proposed takeover by 21st Century Fox were also incurred.

Sky said it would increase its drama budget this year by a quarter to secure subscribers and would seek to debut four originals on its networks each quarter.

Recent Sky1 drama debutant Riviera, starring Julia Stiles, has become Sky’s most popular in-house series, the operator said. The company has also linked up with HBO in the US on Chernobyl, a five-part drama ordered as part of the two firms’ US$250m drama production fund launched earlier this year.

Jeremy Darroch

Sky CEO Jeremy Darroch also took a swipe at streaming services, claiming that “local dramas such as Babylon Berlin in Germany, Britannia in the UK and the return of the third season of Italian crime drama Gomorrah illustrate our strength in local programming that other SVoD providers cannot match.”

He also praised “particularly strong results” in Germany and Austria, where operating profit was up from £4m to £40m, and in Italy, where profits rose from £56m to £136m.

Darroch added that the company had a “strong set of growth plans” for the coming year, including increasing investment in Sky originals by 25% and creating 300 new technology roles to support its streaming services.

Additionally, the Sky boss confirmed the company was planning to launch “a simple and affordable OTT service in Spain,” something C21 first revealed a year ago.

The company said it had added 686,000 new customers, taking its total to 22.5 million, and confirmed it had reached five million subscribers in Germany.

Revenues were up 5% to £12.9bn but the company’s pay TV churn levels – subscribers leaving the company – remained above 11%.

Sky is also facing the prospect of a £171m special payment after the Fox deal was delayed, although no dividend is being paid this year. The company is preparing for another auction for Premier League rights early in 2018.