BSkyB, which acquired broadband service provider EasyNet last year, says the cost of ramping up broadband subscriptions pushed caused its half-year pre-tax profits down £34 million to £356 million ($700 million). BSkyB, of which News Corp owns 39.1%, has signed up 259,000 broadband customers through January 28 – but at a cost of £84 million ($165 million).
The company said again, as it has previously, that its broadband efforts – deployment and marketing – will decrease operating profit by £400 million ($787 million) until the summer of 2009. At that point, BSkyB says, broadband will become a profit contributor.
BSkyB CEO James Murdoch said broadband has helped to increase the company’s overall growth, pointing out that 18% of the broadband customers are new to Sky. The company hopes to sell every customer all of BSkyB’s various services.
In the six months ended December 30, BSkyB got £22 million ($43.3 million) from home broadband customers. Its broadband efforts began in July 2006 after it acquired EasyNet.
EasyNet’s broadband network, at the time BSkyB acquired it, was available to 28% of UK households. BSkyB expects to build the network out to cover 70% of the country’s homes by the end of 2007.
BSkyB gives broadband free to its pay-TV customers who only have to pay BT’s line charge if they live in an area where EasyNet has not yet installed its gear in the BT exchange. Their only cost is £40 ($78.80) for installation and connection, plus the £11 ($21.64) a month that goes to BT to cover BSkyB’s cost of using BT’s gear in the telephone equipment exchange instead of its own.
In areas that have BSkyB’s broadband infrastructure, the company offers three broadband packages to its pay-TV subscribers. The base plan is free, with 2 Mbps download speed and a total monthly download of 2GB. A ‘Connect’ plan is available for pay-TV customers in areas where the company has not yet built out its broadband network. Connect goes for £17 ($33.50) a month plus the £11 a month that BT gets.
The company predicts it’ll have 700,000 broadband subscribers by the end of its financial year in June.
The Connect service is for areas where BSkyB has not deployed its network, meaning BT’s infrastructure has to be used.
BSkyB says about 70% of broadband subscribers are choosing paid options. It was not clear whether that includes customers who had to sign up for the Connect plan.