Dekker said the fall “raises questions about the price sensitivity of Sky’s heartland customers who have seen reasonable price increases in the core sport component, in particular, over the last two years.”

This year, price increases have been offset by customer declines, the analyst said.

‘Back over 1 million customers’

Chief executive Sophie Moloney mused on an analyst call this morning that the reaction could have been different if Sky’s financial year had closed on July 31 (it wrapped up on June 30).

Afterward, the CEO told the Herald that was a reference to customer numbers being “back over 1 million” by the end of July – propelled by the first week of the Olympics, the All Blacks back in action and season 2 of House of Dragon.

Net profit forecast 11% below consensus

That development nothwithstanding, Craig’s Rob Morrison noted that Sky’s results presentation included a downgrade to its compound annual growth rate projection through to FY2026, which was reduced from 3-4% to a 1-2% range.

Morrison said the net profit delivered today ($49.2m) was a snip below the consensus estimate, but that Sky’s guidance for FY2025 of $40-55m is 11% below the consensus at its midpoint.

Faith that a big dividend is on the way

Nevertheless, Morrison (who had a $3.41 12-month price target on Sky going into today’s results) said he maintained his positive view of the stock.

The profit payout was a key factor. Sky announced a full-year dividend of 19 cents per share today, higher than the guidance of at least 17.5cps, with 21cps forecast for FY2023 (in line with the analyst consensus).

Morrison saw Sky on track of hitting its target of a 30cps dividend by FY2026.

Moloney told the Herald she was confident that mark would be hit.

The CEO said the net profit dip was the result of increasing depreciation. Her focus was on the dividend, free cashflow, which increased by 43% to $26.7m, ebitda growth outpacing revenue, and ad revenue growing 13% to $53.6m despite a tough market amid the free-to-air Prime being rebooted as Sky Open and ads being introduced to Neon.

Possible ad boost from Sky Sport Now

All up, Sky increased its share of the TV advertising market by 2.7 points to 12.6%.

Moloney saw scope for further boost from the introduction of dynamic replacement ads on Sky Sport Now, meaning the commercials that run with a Sky Sport broadcast will be swapped out for different ones for the streaming app.

There was no immediate word on whether there’ll be changes to Sky Sport Now pricing or its mix of plans after ads are injected.

Pricing review in New Year

Ads can help address Dekker’s “price sensitivity” issue.

On Neon, the ad-supported plan costs $12.99 per month vs the standard plan’s $19.99.

And on the hardware front, Sky has wiped the up-front cost for the new Sky Box and Pod.

Moloney said Sky would review the price of its plans in the New Year. The outcome would depend in part on how consumer spending and confidence shaped up for the full calendar year.

A game of one-half

Sky has entered “constructive” negotiations with NZ Rugby, Moloney said. The pay-TV broadcaster’s current contract – worth a reported $535m – expires in December 2025.

The CEO said the “landscape is very different” from the last round of negotiations, where she said “Spark Sport was in the ascendant at the time. They had the Rugby World Cup, they had [domestic] cricket”. The pressure was on to write a big cheque.

Post-Spark Sport, there’s a more nuanced challenge – and one that could even turn into a positive for Sky, financially – or at least one that sees a deal worth a lot less than the half-billion-dollar one inked in 2020.

Egged on by its digitally-minded investor Silver Lake, NZ Rugby has launched its NZR+ streaming platform, which could potentially grow from documentaries and backgrounders to serve as a pay-per-view vehicle for watching All Blacks matches live.

Moloney wouldn’t be drawn on whether Sky and NZR+ both showing some live games was on the table, but she did reiterate Sky’s new philosophy on deals in general.

“We’ve been really upfront about the fact we’re comfortable with co-exclusivity or sharing of rights,” she said.

She added that NZR+ was already showing selected top-tier NZ games offshore territories, recalling the model used by RugbyPass, which streamed Super Rugby to fans in countries without rights deals (it died during the pandemic).

Neither would Moloney drawn on the possibility that paid content could form part of a broader TVNZ push into sport – or whether it was politically palatable for the state-owned broadcaster to compete on that front. But she did offer, “TVNZ’s strategic strength is their free-to-air reach.” TVNZ and Sky had already partnered on grassroots rugby and netball. Further co-operation could be possible.

The Sky CEO indicated analyst speculation that a new rugby deal would be finalised by the end of this year was correct. Historically, each contract had been signed 12 months in advance she said, which was necessary for planning.

Satellite delay accelerates Internet plans

Sky currently uses the Optus D2 satellite. It had been due to migrate its customers to the new Optus 11 at the end of next year, when D2 is due to reach the end of its life – but now the Australian telco is facing delays.

Moloney played down the hiccup. She said Optus would wear the cost of migrating Sky’s customers to an alternative satellite. Two were available. While there would be a degree of logistical peril, “we migrated from D1 to D2 migration in April last year, which no one had any idea about – nor should they.”

The delay also has an upside for the new Sky Box – or at least Sky Box owners who don’t want a dish on their roof. The broadcaster has accelerated its plans to deliver all Sky Box channels via the internet – a feature that will now be introduced this financial year.

Moloney added that via Sky Go, Sky Box customers could already access all of its content via broadband.

Sky’s customer mix, as of June 30

Of the Sky Box customers, 380,000 were using the old “decoder” model, 88,000 the new Sky Box and 11,000 the new Sky Pod.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.