Sky profits hit by Italian and German rights deals but subscribers up under Comcast
By Simon Ward
Revenues at Sky, the European pay-television specialist, fell by 5 per cent on a pro forma basis in the first quarter of 2019, following its takeover by US media giant Comcast, and profits were also down as the company digested the impact of new soccer rights deals on the continent.
Comcast’s financial results for the three months to the end of March show that UK-based Sky generated turnover of $4.8 billion in the period in question, down from $5.05 billion in the same period a year earlier, although there was a 1.3 per cent rise if foreign exchange fluctuations are stripped out.
Earnings before interest, tax, depreciation and amortisation fell from $799 million to $663 million, a decline of 17 per cent, or 11.3 per cent excluding currency fluctuations, as operating expenses slipped by 2.7 per cent (up 4.4 per cent on an adjusted basis).
Comcast said: “The higher expenses were primarily driven by new contracts for Serie A and Uefa Champions League soccer rights in Italy and Germany, partially offset by lower other operating costs.”
Sky Italia’s deal for Serie A and the Champions League and Sky Deutschland’s contract for the Champions League all run for three years and came into effect at the start of this season.
Sky is shelling out €780 million ($871 million) per year for Serie A in an agreement signed last summer that runs to the end of the 2020-21 season (the remaining rights went to DAZN, the over-the-top streaming service, for €193 million per annum).
This is on top of the between €270 million and €290 million per season Sky is paying for exclusive rights to the Champions League, having replaced commercial rival Mediaset. Sky also retained rights to the Europa League.
In Germany, Champions League rights are now shared by Sky Deutschland and DAZN in a three-year deal worth a reported €185 million per season.
Sky does not show the Champions League in the UK (where BT Sport retained the rights), but the above deals are likely to have helped it retain and attract subscribers elsewhere and indeed the company’s total ‘customer relationships’, including TV, broadband and phone subscriptions, increased by 3.5 per cent to 23.7 million year-over-year.
Net additions for the quarter came to 112,000, compared with 38,000 in the first quarter of 2018, while content revenue, including wholesaling of sports programming, rose by 38 per cent to $370 million.
Comcast completed its takeover of Sky last October in a deal worth £29.7 billion ($38.4 billion), having outbid Rupert Murdoch’s 21st Century Fox to end the Murdoch family’s long association with the company.
Pro forma results are presented as if the Sky transaction had occurred on 1 January, 2017 and are primarily based on historical results of operations, adjusted for the allocation of purchase price and excluding costs directly related to the transaction.
Comcast said that revenue at NBCUniversal, which includes US national network NBC, fell by 12.5 per cent to $8.31 billion in the first three months of 2019.
Takings from broadcast television fell by 29.4 per cent to $2.47 billion.
However, last year’s figures had been exceptionally high because of the Super Bowl and winter Olympic Games shown by NBC, which accounted for $1.6 billion in revenue.
Excluding these events, turnover was actually up in the first quarter of this year.
Across the Comcast business as a whole, turnover rose by 18 per cent to $26.86 billion, while profits climbed by 14 per cent to $3.55 billion.
In USA, Comcast’s total customer base rose by 300,000 to 30.7 million, with the addition of 375,000 high-speed internet customers more than compensating for the loss of 121,000 traditional video customers.
Brian Roberts, chairman and chief executive of Comcast, was upbeat on the results, saying: “Comcast is off to a terrific start in 2019, financially, operationally and strategically. In the first quarter, we delivered strong EBITDA and earnings per share growth, as well as robust free cash flow.
“Comcast Cable had the best quarterly EBITDA growth in over a decade, while NBCUniversal again posted favourable results. We also continued to strengthen our leadership position in valuable customer relationships and premium content. Now with the inclusion of Sky, we grew customer relationships by 3.6% year-over-year, including 400,000 net additions in the first quarter, reaching over 54 million relationships in total.
“Across all parts of the company, our teams are executing at a high level and collaborating to drive growth and innovation. I’m excited about this quarter’s results and the opportunities ahead."
Next year, NBCUniversal is planning to launch an advertising-supported TV streaming service that will be free to its pay-TV customers in USA and to Sky customers overseas.