Sky Network Television is feeling the pressure of competition as its market share dropped in the year ended June, Craigs Investment Partners broker Chris Timms said yesterday.
New Zealand's dominant pay television company reported an improved operating profit of $238.9 million for the year, up 6.4%.
However, its subscriber base dropped 1.5% to 851,561 and Sky was now in 47% of New Zealand homes.
Mr Timms said the subscriber base was a key measurement for Sky; people were now looking at alternative entertainment sources.
''Sky can be seen as a luxury. When people are happy about life, they continue to let those luxuries go on. But it's not easy out there. We have no inflation but the cost of living is increasing.''
Recently, the PGA, or the fourth golf major, was held but it was not shown on Sky, he said.
Those keen on golf were subscribing to a golf channel for $140 a year.
If not for the rugby, Mr Timms believed more people would leave Sky because there were many options such as Apple TV and Netflix.
Sky's reported profit rose to $171.8 million, or 44.09 cents per share, from $161.4 million, or 42.61cps, in the previous corresponding period. Revenue increased 2% to $927.5 million.
The result was lower than the $177.7 million profit and $930.7 million revenue expected by analysts in a Reuters poll.
The company's shares fell 3% to $5.46, and have shed 6.8% so far this year.
Sky increased its average monthly revenue per residential user 2.6% to a record $79.54 as the number of subscribers using its higher value My Sky service rose 9%.
The company is spending $120million over three years to upgrade its digital boxes to My Sky decoders, which will enable access to new video-on-demand services that it is hoping will lure new customers.
''The challenge we are now seeing is in attracting new customers,'' chief executive John Fellet, said.
''That's why we are branching into these new services.''
Mr Fellet, who has headed the company for 14 years, said the rollout of ultra-fast broadband was more of an opportunity for the company than a threat.
Local rivals sending content through the fast-internet service include telecommunications company Spark New Zealand and online sports broadcaster Coliseum Sports Media, as well as overseas rivals such as Netflix, Quickflix and Ezyflix.
The company was focused on securing the most important content to lure customers. Mr Fellet said.
It has renewed and acquired rights to exclusive premium content including long-term rights with Disney, Discovery, HBO, New Zealand and Sanzar Rugby, and New Zealand cricket and netball.
That meant programming costs rose 5.9% to $296.6 million, taking it to 32% of revenue from 30.8% of revenue in the pcp. Sky said the cost was set to increase further in future years.
The company will pay an unchanged final dividend of 15 cents per share, taking the total annual dividend to 30cps up from 29cps.
No guidance was given for 2016 but it is normally provided at the annual meeting.
At a glance
• More revenue from fewer customers
• Subscriber numbers fall below 50% of New Zealand homes.
• Traditional subscribers look for alternative entertainment sources
• Sky to focus on premium content
