Sky TV’s easy credit

Sky’s results came out this week – and while subscriber numbers grew the financial results were at the low end of expectations. I feel that their product is disappointing – with too much rugby translating into a general loss of passion for the game, and with an increasing awareness that in tough times paying money to Sky is not really necessary.

Meanwhile only 17% (14,500) of the mySky HDi subscribers have paid $10 a month for access to the HD channels – so clearly the HD channel proposition is not very strong.

Despite this, and somewhat surprisingly during a recession, Sky’s churn rate decreased from 14.9 to 14% for the year.

Or maybe that’s not surprising. My Sky bill is on some sort of manual paper process and as I completely fail at this sort of thing I’ve been receiving a series of calls from Sky credit people. The calls go something like

“Hi it’s so and so from Sky – we’d just like to remind you that your bill is overdue”

“Uhh – thanks”

and that’s it. No – “pay it now or we will disconnect” or “would you like to pay it now using your credit card” or even “when are you going to pay it?“. They just call, tell me I am late and then go away. This went on for some months (I’ve since paid the bills)

It’s like Sky have decided not to churn anybody – especially those with a mySky box.

They do show in their annual report that bad debt went up from $3.3m to $5.2m, but it seems that their definition of bad debt is pretty lax. A note to their annual report states:

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

That means if I’m not asked the question “when can you pay?” then no “objective evidence” of my ability to pay is collected – and Sky doesn’t have to write down my debt. Of course I’m just a single data point, but there is some evidence from the accounts. Does this easy credit translate into the higher receivables (up $6m) and lower cash (down $4m)? If so it means higher profits as less debt is written off.

On the other hand are Sky being very smart here – recognising that times could be tough for their clients, and thinking in the long term? By being soft on credit now Sky customers will more likely keep their system through the tough times and get back on track when times are good. That’s clever thinking.

About Lance Wiggs

@lancewiggs
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5 Responses to Sky TV’s easy credit

  1. I was thinking about Sky over the weekend while visiting a friend – with Sky (I don’t have a tv). If people are going out less but staying in more then they may hold on to Sky. The family I visited conceded to that. While a luxury at the $50 per month (or whatever), it’s cheaper than a family night at the movies or dinner out. So yeah, maybe Sky are taking the soft approach knowing they’ll likely hold on to the majority if they don’t piss them off too much.

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  2. Chris Keall says:

    Leaving aside billing issues for a moment, here’s a snip from a Sky TV earnings preview I compiled for NBR:

    ————

    … Sky TV chief executive John Fellet said his company would report lower churn on Friday.

    “I’ve been in pay TV for 30 years and happens in every recession,” said Mr Fellet. “You put off buying a new car, you put off vacation plans, you watch 10% more TV.” The result: you’re less likely to create churn; that is, to abandon your subscription.

    The Sky TV boss said since FY10 began, on July 1, churn has dropped again.

    Our analysts agree. [Goldman Sachs JB Were’s Tristan] Joll said that BskyB’s June quarter in the UK – in which it record low churn of sub-10% – bears out Mr Fellet’s rugging-up-for-the-recession theory.

    For Sky TV, Mr Joll sees churn at 14.2% for FY09, slightly better than FY08’s 14.6%. And he sees greater loyalty in the year ahead, with annual churn dropping to 13.5%.

    Ms Urlich is more optimistic, forecasting FY09 churn of 13.6%, helped by the fact that subscribers to the premium MySky HDi service stay more loyal (their churn is around 5%).

    http://www.nbr.co.nz/article/earnings-preview-sky-tv-107604

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  3. Adam J says:

    I have an HDi box, with the HD channels, but they just don’t bill me the $10 for the HD ticket. Perhaps this is why such a low number are ‘paying’ for it.

    When we signed up, we got 3 months free Multiroom (And if you have multirom you get the HD ticket for nothing). We cancelled the Multiroom after the 3 free months, and I suspect they forgot to start billing us for the HD ticket at this point.

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  4. Adam J says:

    Also, many times I have asked for my bill via email and am always told that this is an increasingly common request however their system is just not capable.

    Sky is now the only bill I recieve by mail, everything else comes electronically.

    Even my bank statements are all electonic now, the only exception being my BNZ Visa, which they don’t seem to be able to do electronically yet.

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  5. Michael Carney says:

    Forgive the late comment on this topic — I’ve just come back from speaking at a conference in Bangkok — but wanted to note the most likely reason for the apparent low (17%) uptake on the Sky HD ticket: existing MySky subscribers (i.e. those with the original MySky box) were strongly encouraged to hold onto their v1.0 unit when they signed up for MySky HDi. The incentive: pay for Multiroom ($25 a month) to keep both boxes and receive HD free (normally $10 a month).

    If you look at the MySky Multiroom subs (41%) and add them to the 17% HD ticket only, you get a more realistic likely total of HD subscriber uptake (up to 58%).

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