Netflix effect takes toll on Sky as Fox casts a shadow

Sky today laid bare its struggle to stem the flow of customers leaving it for cheaper streaming services, raising concerns about the state of the pay-TV giant’s business if the £11.7 billion sale to 21st Century Fox falls through.

The FTSE 100 group said 11.5% of its customers quit over the past year in the UK and Ireland, compared with 11.2% the year before.

Sky said customer churn was “at a higher level than we would like”, but added it had a “strong set of plans to address it”.

The company, which said 4.7 million people watched the first episode of the new Game of Thrones series on Sky, made a similar statement in December when it released its half-year results, suggesting it has failed to stop customers quitting the service for streaming rivals such as Netflix. Sky is hiring 300 tech staff to work on digital platforms.

“As we said last time, it’s taking a little bit longer for those [plans] to have an effect than I would have liked,” said boss Jeremy Darroch, who denied it was distracted by the takeover by Rupert Murdoch’s 21st Century Fox.

Liberum analyst Ian Whittaker said the customer numbers “do not look good”, adding: “The Fox bid will support the shares but any concerns over the bid not going through will refocus attention on the fundamentals.”

Two weeks ago, culture secretary Karen Bradley frustrated Sky when she said she needed more time to decide whether to refer the takeover to the competition watchdog amid concerns about the effect Murdoch having full control of Sky would have on media plurality.

Aside from the customer numbers, the financial results were better than analysts expected.

Revenues were £12.9 billion, showing underlying growth of 5%, while operating profits dipped just 6% to £1.47 billion, even after splashing out an extra £629 million on Premier League rights.