Brian Roberts’s plan was to use Sky to build an international powerhouse outside the US – after being beaten by Disney in the battle to acquire his prime target, Rupert Murdoch’s 21st Century Fox – but some analysts and industry figures wonder if he has been taken for a very expensive ride.
Seven years on and the value of Sky has been written down by almost a quarter, the broadcaster’s stranglehold on new prestige TV shows and films has been broken, losses have spiralled at Sky News and bosses continue to deal with an embarrassing £300m advertising scandal.
“It is certainly not what Comcast dreamt,” said one former senior Sky executive. “Of the big US businesses in the sector they were the least internationally diverse, and there was an arms race going on. They convinced themselves there was a lot of opportunity, that Sky would be the international launch pad. There was initially a lot of optimism there, but it hasn’t been that beachhead.”
Sky’s most recent financial results underscore the tough market conditions it continues to navigate, re-engineering a business built on high-priced pay-TV packages as the streaming revolution reshapes broadcasting economics and viewer behaviour.
In 2023, operating losses doubled as Sky recorded a pre-tax loss of £773m, fuelled by a £1.2bn writedown in loans to its German and Italian operations, and a £327m impairment charge at the loss-making streaming service SkyShowtime, a joint venture with US media behemoth and Channel 5 owner Paramount.
A three-year, $1bn (£754m) cost-saving programme led to the loss of 1,000 jobs last year, mainly engineering roles as 90% of new TV customers choose satellite dish-free products such the Sky Stream “puck” or Sky Glass smart televisions. And in March, 2,000 customer service roles were cut in acknowledgment of the shift to digital communication and artificial intelligence solutions.
Since being acquired, Sky has changed tack from battling US streaming services to becoming a one-stop content aggregator by striking deals to bundle services such as Netflix on its platform.
While this has largely proved successful, it has taken its toll on the amount of exclusive, premium US content it offers – companies such as Disney have aimed to keep control of premium content through their own streaming services – and raised pressure on its own studios to create homegrown hits.
In December, Warner Bros Discovery (WBD), the owner of the film studio behind Barbie and HBO hits including The Last of Us and The White Lotus, struck a new content deal with Sky aimed at boosting its own streaming service HBO Max when it launches in the UK next year. From next April, the ad-supported versions of HBO Max and Discovery+ will be bundled for Sky customers.
“HBO content is probably still the best in the world, certainly it is the crown jewel programming for Sky’s entertainment offering,” said a top executive at one of the UK’s biggest production companies. “Sky customers are going to say: ‘I don’t want a Brassic, I want the kind of hits HBO churns out, like a Last of Us or Succession.’”
Under the deal, Sky will lose the right to air newly created WBD and HBO shows such as the forthcoming Harry Potter TV series and their Hollywood films on its own channels and services directly to customers.
This raises questions about the viability of Sky Atlantic, which has been built off the back of a longstanding collaboration with HBO, and whether Comcast is prepared to invest heavily enough in upping Sky’s content pipeline.
“In a subscription business you have to be able to provide access to content that people can’t get elsewhere,” said the production executive. “Exclusivity has tremendous power and value, where does it leave Sky long term? Sky has had hits like Day of the Jackal, but there is definitely talk in the industry about Sky needing a hit factory now.”
Sky’s commercial relations with partners Paramount and WBD, for which it has deals to sell advertising on its own channels and those of third parties in the UK, have also been rocked by an advertising scandal.
Sky uncovered miscalculations by its ad sales operation, Sky Media, spanning many years which resulted in partners not receiving the correct revenue from their deals, a problem industry sources say amounted to £280m to £320m that needed to be reimbursed.
“Heads rolled internally for that,” said one senior media industry executive. Sky says that it conducted a review and acted “decisively” to notify partners and is in the process of fully reimbursing them. “We have made the necessary internal changes to prevent this recurring,” said a spokesperson.
While the broadcaster seeks to repair the damaged reputation of Sky Media, which brings in more than £1bn in ad revenues annually, there is growing concern over the future of Sky News.
When Comcast acquired Sky it promised to maintain the service’s budget of about £100m for at least a decade, and increase it annually in relation to inflation.
Sky has never officially revealed the level of losses the news operation makes, but it had long been estimated at around £30m annually. However, multiple sources say that a combination of factors including rising costs means that it is now making losses of as much as £70m to £80m.
Some at Sky News worry that when Comcast’s 10-year pledge expires in 2029, its programme of cuts will hit the news-making operation.
David Rhodes, the executive chair of Sky News, has said the Comcast commitment provides Sky News with more security than most other organisations, and that the parent company has been “supportive of our independence every step of the way”.
Nevertheless, Comcast has recently shown that it is willing to make sweeping changes across its businesses. It is in the process of spinning off US cable networks including MSNBC, E! And SYFY into a new publicly traded company, Versant, as traditional TV audiences continue to dwindle.
The move has renewed some speculation about the long-term plans for Sky, as Comcast has previously seriously explored a sale of the German operation.
Craig Moffett, the co-founder of the respected US equity research company MoffettNathanson, has previously published research notes criticising Comcast’s move to buy a “declining asset”. Asked if that view had changed, he said: “What I think is clear from that writing is that they never should have bought it in the first place. I’ll let what I’ve written speak for itself.”
However, Sky is not facing the same precipitous “cable meltdown” conditions seen in the US market and remains a must-have for many households, especially sports fans.
In the last Premier League TV rights auction deep-pocketed Sky paid a record £5.2bn, winning four out of the five available “packages” of games through to the end of the 2028-29 season. The deal, which included an unprecedented number of matches, at least 215 a season, has helped Sky to break viewing records.
In April, a combination of Premier League and Rory McIlroy’s historic Masters golf win helped Sky Sports to achieve its most-watched day of sports ever.
Sky’s canny move to get into broadband in 2006 has also seen it build a customer base estimated at 6.6 million by Enders Analysis, second only to BT.
And Sky Mobile, launched in 2017, has an estimated 3.7 million subscribers and continues to grow at an estimated 5% to 10% annually, making it the fastest-growing mobile service in the UK.
“Is Sky facing a slow death? No,” says Claire Enders, the founder of Enders Analysis. “They have survived 13 years against the likes of Neftlix spending enormous amounts of money and it is not like their model has been unseated, it has just had to change.
“It has been an incredibly tough market, and there are more TV options than ever before, and Sky is investing very heavily in a number of strategies to reduce dependency on content now on streaming services.
“You can say they have been through the worst already and come out the other side, the business has stabilised and is being set up for the very long term.”
