22 Oct 2015

Sky shares drop amid higher costs

12:34 pm on 22 October 2015

Shares in pay television operator Sky Network Television plunged 11 percent yesterday after it warned that its full year net profit will fall because of higher costs for programmes and rolling out new services.

Sky TV's chairman Peter Macourt told shareholders at the annual meeting that the net profit for the year to June was expected to be between $153 million and $158m compared with last year's $172m.

Sky TV's costs have risen because of the Rugby World Cup, the new SANZAR rugby agreement, and the new Disney and Discovery channels, Mr Macourt said.

Meanwhile, the entry of new competitors such as Netflix have raised the cost of other programmes.

Sky was also having to spend on new services, such as Neon and Fan Pass, to bring in new consumers.

"We think we're going to be targeting a market we don't currently have as a Sky subscribers."

The company was expecting a fall in subscribers after the Rugby World Cup, and the extent of that decline would shape the full year result and the dividend payout.

The meeting easily passed a resolution to increase annual directors' fees by 27 percent, although the Shareholders Association voted against it because it did not believe the company had justified the increase nor explained how the board intended to spend the money.

Sky would look to improve its communication with shareholders, Mr Marcourt said.