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Sky is Europe’s leading entertainment company. The group serves 20 million customers across five countries: Italy, Germany, Austria, the UK and Ireland. We offer the best and broadest range of content, deliver market-leading customer service and use innovative new technology to give customers a better TV experience, whenever and...

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RBS analysts hail BSkyB’s Formula 1 success

BSkyB's success in securing F1 rights come hot on the heels of it sparkling full year numbers last week.


BSkyB’s (LON:BSY) coup in securing rights to Formula 1 is a “major success”, according to Royal Bank of Scotland analysts. They reckon the deal should help support the satellite broadcaster’s subscriber growth, especially given the average F1 audience on the BBC is an astonishing three times the average Premier League football audience on Sky.

In an upbeat note on the deal, which means Sky has acquired the live rights to all 19 races a year for seven seasons, from 2012 to 2018, the analysts also point out that the F1 attracts a slightly different demographic to Premier League football, adding another interesting positive into the subscriber growth mix.

Under the terms of the deal, with Sky will show all the lives races live, BBC will show just nine, including the British and Monaco Grand Prix, and the final contest of the season, as well as the highlights.

The new deal effectively cuts short the cash-strapped BBC’s current five-year deal that was due to run until 2013. RBS analysts say it go some way to helping the BBC achieve budget.

Cuts, the light of the licence-fee freeze, which runs from 2011-17.

It is thought that under the terms of the new sharing agreement, the BBC will save about £25 million a year.

The analysts estimate the BBC was paying £45 million/year for exclusive access to the rights. On the basis of that they reckon Sky is paying less for preferential (but not-exclusive) rights. It is an “astute” deal, they add.

The BBC averages 4.7 million viewers for F1 (with the peak reckoned at 6 million), while Sky averages around 1.4m for live Premier League matches in the UK.

“Many of the F1 viewers will no doubt be Sky subscribers, but F1 fans who are not Sky customers now have a reason to subscribe, while those F1 fans who are Sky customers are less likely to churn,” says RBS, adding subscriber growth at the satellite broadcaster should benefit as a result.

The success in securing F1 come hot on the heels of BSkyB’s sparkling full year numbers last week. It posted operating profit of £1.07 billion for the year, up from £872 million last year, on revenue of £6.5 billion, up from £5.7 billion a year ago.

BSkyB now has 10.3 million customers with net growth of 40,000 direct-to-home (DTH) TV customers (DTH) and 31,000 standalone home communications (broadband, telephony and line rentals) customers in the quarter.

Sky+HD customers reach 3.8 million, up 30 per cent year on year. Subscriber gains were evident across all areas, but were particularly strong in home communications.

The company also announced both a 20 per cent increase in the ordinary dividend and its intention to return £750 million to shareholders through a share buy-back programme."

In the light of the strong results and the F1 deal, RBS analysts have raised their 2012 earnings per share forecast by 4%. At the same time the broker has rejigged its forecasts for the Key Performance Indicators.

The analysts reckon the tough consumer environment will make it harder to grow pay-TV subscriptions so has lowered its pay TV net addition forecast from 313,000 to 277,000. It has also lowered its HD forecast from 850,000 to 650,000.

The tough times, however, should generate greater interest in BSkyB’s value proposition for home communications (broadband and telephony) and for this business stream RBS is raising the customer additions projection from 500,000 to 700,000.

RBS rates the shares a ‘buy’ with a price target of 830 pence. 


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