Chief executive Jeremy Darroch says the satellite broadcaster wants to do more in what he describes as a ‘great, great market’
“Believe in Britain” is the slogan on the business card handed to me last Friday by one of the Sky team who accompanied chief executive Jeremy Darroch to Dublin for the opening of the broadcaster’s impressive new corporate headquarters here.
The expansion is a statement of intent by the satellite broadcaster. About 900 new jobs to begin with, an investment of €1.5 billion over five years, and the imminent launch of broadband and home telephone services.
Twenty-four years after its launch, Sky is really starting to “believe” in Ireland. Some wonder why it has taken so long for it to make such an investment in Ireland.
Sky doesn’t publish turnover or profit figures for its Irish operation. Some years ago, it even stopped releasing the number of subscribers it has here.
But the consensus within the industry is that it makes a lot of money from this market.
In a speech at the official launch of the offices, which was attended by Taoiseach Enda Kenny, Darroch stressed how Ireland has been a “great, great market” for Sky over the years.
In our interview, Darroch confirms the business here is profitable and “performing well”. Even in the recession, it has continued to grow and the average spend by customers is up, he says.
Losing money
So why has it taken until now to build a presence – it previously had about 50 staff here – on the ground?
“When the business was set up [in 1989], Sky for many years was successful but losing money,” he explains. “Its history was one of significant investment and early stage losses.
“We ran Ireland as an offshoot of the UK and that was working. There was nothing wrong with that as a business.
“My own view was that, for us to take the next step over time here, we really needed to build more of an on-the-ground presence. The launch of broadband is a good opportunity to do that because we can see our business re-scaling here over the next few months.”
Sky’s funky new offices – there’s a pool table, table tennis, lots of glossy sports murals on the walls and even a faith room – will act as a customer contact centre and a sales office. These functions were previously carried out by in-house staff in Scotland and third-party service provider Abtran in Co Cork.
The push into broadband and home telephone services helped persuade the listed company’s top brass that it was time to take these activities under its direct control from two floors of a large modern office block on Burlington Road.
The broadband and phone products will launch in February after a number of months of pilot testing with a closed group of about 300 customers.
A chat forum on Sky’s Irish website indicates that those who participated in the trial were offered one-year contracts at knockdown prices.
They could avail of unlimited broadband for €10 a month and landline calls to Ireland and some other destinations for €7.50 a month.
What will it charge for its triple play – TV, broadband and telephone – service when it goes live in February?
“We haven’t announced the price yet. We’ll hold all of that for the consumer launch but, look, it will be attractive, as always.”
Darroch says Sky wants to achieve significant scale with its broadband launch.
“So we have to make sure we have the right price and the right value proposition.
“It’s going to be a long game and hopefully a tale of growth for us for many years.”
Sky is no novice when it comes to broadband and telephony, having launched broadband in the UK six years ago.
Today, it has 4.1 million broadband customers in the UK, of which 3.5 million are taking its triple-play offering.
That’s roughly one-third of its overall 10.6 million subscriber base for Britain and Ireland.
According to figures from Nielsen, there are more than 700,000 Sky set-top boxes in the Republic, although not all of these would have active subscriptions.
What target has Darroch set for the Irish business?
“No specific targets that we’re disclosing today,” he says. “The job is to get to market, start to build success and to go from there.
“We’ll offer our own service and we’ll encourage as many people as possible to join Sky. That’s what we do day in and day out. The idea is to build a mass market business.”
Darroch was also coy on what speeds its broadband customers will enjoy when it launches here.
The company has agreed a wholesale deal with BT Ireland. This will include piggy-backing on the Eircom network in parts of the country where the BT network doesn’t reach.
This suggests that the maximum speeds it could offer customers would be 24Mbs, roughly half of the basic offering from cable rival UPC, which has spent more than €500 million in recent years to bring its network up to snuff.
The reality is that Sky won’t be competing for UPC customers. Instead, it will be targeting Eircom and Vodafone subscribers and hoping that bundling these services with its TV offering will swing them its way.
“In the UK what we found is that speed is only one element of choice and not actually that important in terms of the hierarchy of needs of most customers,” Darroch counters.
“Download capacity is incredibly important and value consistently rates as the most important element of consumer choice in the value proposition.
“And service is really important. Making sure the broadband connection is always on is important.”
Price increase
He claims that Sky has been consistently top rated in terms of customer service in broadband and home telephone since launching these products in the UK and has been outgrowing its competitors over that timeframe, too.
“Broadband and telephony are only two of the additional services that we can offer,” he adds.
“We can offer high definition television as well. We can offer multi-room services and other things that we will dream up and develop over time.”
Ironically, given all the talk of a value proposition, Sky is pushing through a price increase on its TV subscriptions from February 1st.
For some Irish subscribers that will mean paying an extra €3 a month. The web forums have been alive with conspiracy theories that the launch of broadband and telephone next month is a device to distract attention from the price rise on TV.
It certainly seems counter intuitive given that the economy remains depressed and the public were whacked with yet more taxes in December’s budget.
“It’s three years since we last took a price increase,” Darroch counters. “We’ve held prices flat over that period.
“I still think Sky represents outstanding value for money for a family. We went to the cinema as a family the other day and it was £60 before you even have a drink and that’s not exactly cheap.
“You can get all that Sky offers for the price of a family night out for a pizza or a trip to the cinema.”
Darroch also argues that Sky has put “more value” into its TV service over the past couple of years, citing the launch of entertainment channel Sky Atlantic and Sky Go, which allows subscribers to view content on smartphones and other devices when they’re not at home.
“Inevitably, we have to get the right returns from the business to make the investment to keep improving the service.”
Global turndown
One of the innovations of recent years has been 3D, with Sky dabbling in using this technology for certain sports. Some question whether 3D will ever take off in homes, given the need to wear special glasses to view programmes.
“We’re not monetising 3D. Basically, it’s an entitlement that we build in to our HD pack.
“It’s suffered a bit from arriving at the time of the global downturn. Therefore, we’re not seeing the amount of 3D content yet being produced across the globe that we’d hope for.
“Ultimately, there’s a lot of work upstream in terms of glasses-free technology. When that comes through, that will be helpful. But it’s probably still a couple of years out.”
What else might we expect in the future from Sky?
“We’ve got a small business today that we’re building in the UK public wifi hotspots to make it easy for Sky customers to get access to content away from home.”
In Ireland, we can expect more commissioning of locally produced programmes. Sky has already dipped a toe in the water with Moone Boy, a comedy filmed in Roscommon.
“Moone Boy is the first major commission that we’ve done, which we’re delighted with. We’re already moving on a second series and hopefully there’ll be a lot more to come.”
Darroch joined Sky in 2004 as chief financial officer before rising to the top job three years later. He had previously worked as group finance director of DSG International, formerly known as Dixons.
Darroch also spent 12 years in a number of role with Procter Gamble in Europe. This included visits and interaction with its business in Ireland.
Interaction with Murdoch
Both are consumer-facing businesses and provided excellent experience for his current role.
“I enjoy working for Sky,” he says. “It’s a great job; every day is exciting.”
Sky was the creation of media mogul Rupert Murdoch and News Corporation remains its major investor with a 39.1 per cent stake.
Darroch says he has a lot of “interaction” with Murdoch, who is 81. “He’s very helpful, he offers advice if I need it and he’s always been very supportive of our business.
“He was the driving force at the outset and he always encourages us to do more and drive on further.”
News Corp tried to buy BSkyB outright in 2010 but its bid was scuppered by the phone hacking scandal, which engulfed the media mogul and his British newspapers.
His son James Murdoch stepped down as BSkyB chairman last year following shareholder pressure.
Might News Corp bid again for Sky?
“I don’t know,” is Darroch’s straightforward answer. “This is the sort of question I get asked many times and the answer is you’ve got to ask them.
“As a management team, our job is to keep managing the business. If we keep growing the company then I think we’ll be an attractive business and we’ll be delivering for all of our shareholders.
“One of the things we tried to do in the whole bid process was not be distracted but just to stay focused on the business. I think we did a very good job of that.”
Outside Sky, he is non-executive director of Marks Spencer, a board member of the charity Youth Sport Trust and a council member of the Council for Industry and Higher Education.
Darroch grew up in a town 35 miles north of Newcastle and retains a hint of a Geordie accent.
“I was back home at Christmas and man it was cold,” he says as sleet taps against the window.
He has a relaxed style about him, answering questions quickly and with little fuss.
By the time we met, it was the end of a long day of town hall-style meetings. He had discarded the tie and opened the top button on his white shirt.
Back to the Irish business, and Darroch says Sky didn’t hesitate about making the substantial investment in Ireland even though the economy is in the doldrums.
“We’re here for the long term. The business is in good shape and successful, so it made sense,” he says.
“I hope our consumer insight about the Irish marketplace will improve. I think we’ll learn as much from our Irish organisation as we will from the UK.”
Will the employment levels increase in the years ahead?
“Hopefully, this is just the start and we can grow further. We don’t have a particular number in mind. Largely, it will be dictated by the success of the business. But there’s no reason we can’t continue to grow.
“Our business in Ireland is in good shape. We’ve got an appetite to do more. If we can be successful here and do a good job then I think the prospects for the company are strong.”
Believe.
CV Jeremy Darroch
Name: Jeremy Darroch
Job:BSkyB chief executive
Family:Married to Rachel, three children.
Lives: Weybridge, in Surrey.
Hobbies:Any sport, walking, reading and cinema
Something we might expect:He's a Newcastle United fan.
Something that might surprise:"I don't ride a bike". The Team Sky cycling team hit the headlines last year when Bradley Wiggins won the Tour de France.
