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What can newspaper and magazine publishers learn from BSkyB's subscription model?

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Jasper Jackson, TheMediaBriefing Experts' Blog, Broadcast, Consumer Media, Finance and Deals, Newspapers


If you're looking for an effective subscription model for content you can do a lot worse than looking at BSkyB. The figures are hard to argue with: Sky's results for the quarter ending September 30 show revenue of £1.7 billion, adjusted earnings of £392 million and 10.6 million subscribers.

An even more impressive figure is Sky's average revenue per customer (ARPU) - a huge £550 per year, up from £535 a year ago.

So how does Sky manage to get so much out of its customers? It's probably got something to do with what TheMediaBriefing contributor Peter Hobday would describe as having enough different products on the shelves to keep customers buying new products.

Sky's TV packages are structured in a way that offers an appealing upgrade path:

-- Two basic TV packages: Sky offers Entertainment and Entertainment Extra priced at £21.50 and £26.50 per month respectively. Those are premium prices for the average UK household - but a subscriber to the most expensive of the two would generate an ARPU of £318 - well below average ARPU.

-- Add-on packages: A choice between Sport and Movies priced at £21 and £16 respectively.

-- Additional individual channels: Five channels such as Chelsea TV and MGM movies which can be added individually for an extra fee.

-- Sky World: A package offering all the different channels available, plus additional perks such as 3D TV - charged at £65 per month.

The key point is that for a Sky customer to spend the average £550 with Sky they would have to get at least the basic entertainment package and add-ons worth another £19. Sky's upgrade path clearly works. 

Branching out

Most of Sky's customers are TV subscribers - just 350,000 of the 10.6 million total Sky customers only have phone and/or broadband. However, TV subscriptions are growing slowly, up by just 20,000 during the last quarter.

But that doesn't worry Sky because the average Sky customer has 2.7 products, an improvement of 0.2 on the same period in 2011. It's pushing HD TV, broadband (where it has just become the third biggest provider - overtaking TalkTalk) and add-ons like multiroom.

Copycat BT

For BT, pulling off a Sky in reverse by getting its broadband and telephone customers to sign up for TV services could be extremely lucrative. BT's retail arm - which includes consumer telephones, broadband and its Vision IPTV service, made revenues of £1.79 billion last quarter, slightly higher than Sky. It even makes more profit, with EBITDA of £474 million. But per customer it is making £355 - almost £200 less than Sky.

Vision offers one of the best ways for BT to boost that ARPU figure. Only 750,000 of BT's more than 6m broadband customers are signed up to Vision, and in the most recent quarter the service added just 21,000 subscribers. That's a huge upselling opportunity BT is only partially taking advantage of. 

BT has paid a huge sum for rights to Premier League football in a bid to increase Vision's appeal and compete with Sky. But BT might do equally well by taking a few more leaves out of Sky's book when it comes to stacking its digital shelves.

Vision comes in two flavours - Essentials and Unlimited. You can add a couple of packages to Essentials, but the only add-ons for the unlimited package are two sports channels from Sky. A quick look at the BT website shows you how mixed the messages are. 

And the lesson here for publishers?

If publishers paid more care to offering upgrade paths through different levels of access to individual publications and cross sold between publications - they could have more success increasing the revenue they make from each customer they already have a relationship with.

 

Image via flickr and from mattk1979 on a Creative Commons licence

 

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