Sky profit falls 6% as Premier League costs bite

David Beckham: has appeared in Sky marketing for football coverage
David Beckham: has appeared in Sky marketing for football coverage

Sky's profits for the year to the end of June dropped 6% year on year after a fall in UK advertising revenue, while the cost of screening live Premier League football took its toll on UK operations.

Advertising revenue was £508m in the UK and Ireland, down 3.1% year on year, which Sky claimed was better than the UK TV ad market which it said declined by 4% in its fiscal year July 2016-June 2017.

Yesterday ITV reported a 7% year on year decline in TV ad revenue for the quarter to 30 June 2017, which it attributed to "continued economic and political uncertainty" in the UK.

According to Sky’s full year results, its operating profits were down 14% to £1.29bn in the UK and Ireland, which is by far Sky’s biggest market.

However, Sky’s chief executive Jeremy Darroch delivered an upbeat message to investors after reporting a 5% increase in total revenue in constant currency to £12.9bn in the 12 months to 30 June (10% on a reported basis).

The 6% drop in operating profit was described as by Darroch as "excellent" because it was down by "only £97m" after Sky absorbed £629m of Premier League costs.

Despite the hefty costs of securing Premier League football rights, Sky still sees sport as a "significant growth opportunity" and cited an estimated four million sports fans within its UK customer base.

In recent months Sky has expanded its sports coverage offering with new Sky Sports channels such as Sky Sports Mix and dedicated channels for the Premier League, as well as other football, cricket, golf and Formula 1.

Darroch also announced that Sky is creating 300 new technology roles to expand its capability to offer streaming platforms for consumers at home and on mobile devices.

He added: "We enter 17/18 in a strong position with significant growth potential. Despite the broader consumer environment remaining uncertain, we are confident of delivering on the plans we’ve laid out as we continue to give our customers the best content, great products, and industry-leading service."

In the final quarter of the 2016/17 financial year Sky added 35,000 new customers, falling below analysts’ expectations.

Churn, meanwhile, was 11.5% over the year in the UK and Ireland – up from 11.2% last year – which Darroch described as "a level higher than we would like".

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