BSkyB will have to crank up its CRM activity to prevent customers from ditching high-value subscription services – such as Sky Movies and Sky Sports – following the expansion of its on-demand services to include Internet TV.
That is the verdict of City analysts after the company revealed the plan, as part of its fight-back against the likes of LoveFilm and Netflix. It will target the 13 million UK households that do not currently subscribe to its satellite services.
Subscribers to the new online TV service will have a choice of pricing options that include unlimited monthly access or pay-as-you-go. The service, to be launched later this year, follows Monday’s move to add with content from BBC’s iPlayer and ITV’s catch-up provider.
But one analyst warned BSkyB may lose some of its existing, higher-value customers to the on-demand service, and that it would have to work hard on shoring up retention rates.
Ian Whittaker at Liberum Capital said: “While this makes Sky more accessible to households that are not current subscribers, it increases the risk of ‘spindown’ from Sky’s existing subscriber base, as consumers decide to leave their contracts for a more flexible package.”
So far the strategy has been working, with the average revenue per user being £544, up £9 from the previous quarter and £8 in the same period the year before. Customer churn fell back below BSkyB’s target ceiling of 10%, to 9.6%.
Another analyst, Lorna Tibian at Numis, said BSkyB’s churn levels marked “an outstanding performance”, but another observer warned: “Sky’s direct agencies and staff at its Scottish contact centre will have their work cut out to ensure that long-term subscribers don’t downgrade to just pay-as-you-go customers.”
