BSkyB announces better-than-expected results, and the share price drops amid a flurry of 'sell' notes from analysts. It has become almost as predictable as Manchester United failing to win the Premier League.
It is not just the analysts helping to create a little volatility. At a recent City gathering, a very senior broadcaster noisily declared himself a seller of BSkyB shares. The gentleman in question has probably always been a seller of BSkyB, in between hoping to be able to dance on its grave.
The negative picture for the satellite broadcaster brings together three devastating arguments. Within three years, Brussels will remove Sky's right to corner the market in exclusive football rights, even if the clubs suffer a big loss in revenue as a result. When this happens, what will Sky use to persuade its millions of football-loving subscribers not to cancel their standing orders? Sky One certainly won't be enough.
The triple whammy continues with the argument that the ceiling of Sky subscribers is about to be reached. Everyone in the UK has already been marketed to, and those who don't have Sky simply don't want it.
Finally, the broadcasting big shot, whose football club will be hurt by the collapse of the Sky 'monopoly', deployed the Freeview argument.
This goes as follows: Freeview will win the rest of the available games - just look at E4 moving in, and at the amount ITV was prepared to pay for digital terrestrial capacity on the system. Surely BSkyB has to be a sell?
Then the City nerds piped up, speaking in the jargon of ARPU (annual revenue per unit) and churn. Last week's results did show that annualised churn or, to the uninitiated, lost subscribers, had risen from 10.2% to 11.1%. ARPU, meanwhile, fell by 拢4 to 拢382 and, although there was no official figure for the average subscriber acquisition costs, one analyst was convinced this had risen from 拢360 in 2000 to about 拢1000.
Definitely a sell then, and as soon as possible. Except as everybody has noticed, there are a few inconvenient facts and figures standing in the way of the BSkyB doom and gloom scenario.
It may have taken the expensive 'What do you want to watch?' marketing campaign, emphasising the range of channels on offer from satellite TV, but in the traditionally quiet post-Christmas quarter, Sky added 95,000 net subscribers. This took the total to 7.7m, meaning the company is firmly on track to reach its target of 8m by the end of the year. BSkyB will probably be able to break out the celebratory Coke by mid-October.
Sky+'s growth is particularly impressive. The personal video system added 170,000 subscribers in the quarter, taking the total to 770,000. If that sort of growth rate continues, it will have no problem hitting the 1m mark by autumn.
Interestingly, churn among Sky+ subscribers is practically zero, and one-third of those having the device installed are new to Sky.
By next year the Sky+ box is due to be available in a high-definition version and will be the next big thing to hit the broadcasting market.
Even the change in football rights may not be so bad. Sky will have to pay much less for the cream of games, even if it can no longer acquire all the rights.
So in the short term, the analysts and other sellers of BSkyB are probably right. The cracks are there for all to see. In the medium term, however, it could be a very different story, as BSkyB does what it has always done - continue to reinvent itself and hit demanding, publicly set targets.
30 SECONDS ON ... SKY
- Last October BSkyB chief executive James Murdoch began an aggressive subscriptions drive. Marketing spend increased over the nine months to the end of March from 拢80m to 拢379m, or 13% of total revenue.
- Sky posted a 10% increase in turnover to 拢2.96bn in its third-quarter results, revealed on 3 May. Operating profit increased by 3.1% to 拢574m.
- The next day, BSkyB's share price was trading at 0.47% (or 2.5p) lower at 530.5p per share.
- Two years ago Sky paid 拢1.02bn for the rights to domestic football matches between 2004 and 2007, 拢76m less than it paid for 2001-2004.
- Prior to the bidding, the EU Competition Commission voiced concern about Sky's near monopoly of football TV rights. As a result, live games were split into four packages, all won by Sky.