Sky boosts marketing budget to fuel growth

James Murdoch, the chief executive of BSkyB, is increasing the company's above-the-line marketing spend by up to 50 per cent in order to kick-start growth for the pay-TV giant.

Announcing a new target of ten million subscribers by the end of the decade at the unveiling of Sky's annual results, Murdoch has acted to counter City fears that the company's growth had stalled. But despite introducing measures designed to stimulate growth, Sky's share price fell 12 per cent.

The results revealed that Sky was on course to hit its target of eight million subscribers by the end of 2005, having already crossed the 7.4 million mark in June. But Murdoch acknowledged that there are still barriers holding back consumers from adopting pay-TV.

However, he said his new marketing initiatives would help overcome these and that in the long term, the penetration of pay-TV would increase from the current 43 per cent level to about 80 per cent of homes. This implies there could be a further ten million potential subscribers that could be converted to Sky.

In the year to June 2004, Sky spent £49 million on its above-the-line advertising - up £10 million on the previous year, with £59 million spent on other marketing costs.

As part of Murdoch's marketing re-evaluation, Sky, in conjunction with the branding company Venture 3, has developed a new brand identity to be used on all customer communications, including TV advertising, direct mail and customer marketing.

This is designed to reposition Sky as a content provider rather than a technology specialist or a satellite provider in order to encourage refuseniks to reappraise the service.

Sky will also be working with the Tesco Clubcard database company, dunnhumby, to create a database of non-subscriber households, which can then be targeted with more relevant creative and media strategies.

The results revealed a 65 per cent increase in operating profit to £600 million and that average revenue per user had increased to £340, which was on target to hit the £400 mark by 2005.

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