May 1st 2010 - London: News that BSkyB now has over 9 million subscribers is truly awesome in every sense of the word. The media juggernaut, grows ever stronger and powerful in spite of, and perhaps in part because of the recession. With a 13 per cent increase in profits in Q1 of 2010, SKY continues to prove that it's a formidable force in the technology, media and telecommuncation (TMT) sector. And although once considered to be primarily a 'broadcaster' or 'media owner', SKY is now a truly integrated TMT business. Its current strengths lie in branding and bundling expertise across a portfolio of more than just TV channels.

The company has long been a great example of how intelligent subscription packages can entice consumers. Many of the TV channels in any given subscription pack cost the company pennies per month per household to deliver. Premium offerings like movies and sport take the headlines for campaigns but it is the plethora of channels in each subscription pack that help to assure the end user that they are receiving good value for money. A similar approach has been perfected by SKY with the marketing of triple- and quad-play offers, whereby telephone, internet connection and entertainment is bundled together under one powerful brand.

Some of the constituent elements in these bundles deliver very low margins. Indeed, many telco companies competting against SKY in the UK and elsewhere in Europe have discovered that services like video on demand (VOD) are actually incapable of being profitable. Virgin Media, the British cable operator, now consider VOD to be little more than an acquisition and retention tool; a cost that is actually written off as marketing expense.  In other words, VOD certainly helps to attract new subscribers and is proven to reduce churn, but it sure as hell isn't a money spinner.

SKY's most recent push has been based on a rich mix of free hardware, bundled web and 'phone services and -most notably- the addition of more high definition (HD) content. Commentators and SKY management have largely attributed their growth in subs to the sparkling new content. But I would argue it is the combination of benefits that has attracted new customers. HD is the bait but it is the keen pricing and tangible product (Sky+ HD box) which usually close the sale.

SKY now has over one million HD subscribers, a figure which is certainly significant. It equates to over 10% of their total subscriber base and is nearly twice that of the total number of UK homes with BT Vision. Comparisons between the two services often centre on individual elements such as the library of content, the inclusion of premium content, functionality of the set top box etc. In reality it is the sum of these parts that affects consumer decision making, and of course the brand name under which the proposition is presented. SKY is unquestionably a brand synonymous with 'entertainment' and their overall bundles are cogent and compelling. In contrast, BT has a functional, utilitarian brand and doesn't have a track record for packaging and promoting emotive entertainment services.

There are two further factors which I think have helped to drive year-on-year growth in profits for SKY. Firstly, SKY has benefited from excellent promotional alliances with other parts of their corporate family (SKY is 39 per cent owned by Rupert Murdoch's News Corporation). Secondly, as alluded to earlier, the crappy economic climate has made consumers more inclined to chose 'affordable indulgences' such as home entertainment and convenience food. It's no surprise then, that one of SKY's most loyal advertisers is Domino's Pizzas!