planetf1.com

And delivering a fantastic service that their customers appear to be happy with and think is good value for money.

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If...

there are couple of points on here I find a little bit odd. If you don't mind me asking I'm curious as to the following:

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1. Why should you care or worry about how much profit a company is making? Do you always choose your goods or services on the basis of how much profit a company makes or on whether you actually need (or want) the goods or services themselves?


It's probably true that very few people other than shareholders will care how much profit a specific company is making, I can't recall doing it before. But as this discussion progressed I became interested in just how much money it really cost for Sky to provide their services and simply shared what I found. I appreciate it's based on assumption but as a general overview it makes interesting reading.


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2. On the subject of value for money, the value is surely in the service the customer receives, not in how much it has cost the company to provide it. If the value of a TV service is £x, then why should it matter whether the company supplements that income with additional advertising? The customer still gets the subscription they have paid for. Now I understand if you feel that a television service is not worth £31.50 per month (the cheapest offering with HD, and therefore F1, I believe); it's a lot of money to pay. But whatever the amount you do feel is reasonable I don't understand why what the company does in the background should influence your opinion of that service in any way.


Whether we consider something to be of value is subjective and as I said in a previous post, the world isn't black and white where we can say it is always wrong for a business to receive revenue from adverts and subscription as there are many cases where the opposite is true.


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3. Profit doesn't go straight into the chairman's pocket. A substantial amount is usually re-invested to either improve or add to service offerings (I'm not talking about operating costs). For a company the size of SKY (or Virgin, BT etc) that re-investment would have to be in the hundreds of millions to have any impact upon their existing services. If they didn't do this then we'd all still be stuck with old SKY boxes (not even SKY+) and HD wouldn't be where it is today either. Do you recognise this or do you feel that companies shouldn't bother somehow?


Future investments will be paid for out of the company profits, but of course all costs, including existing improvement projects will be included in the operating costs of the company. A quick check shows that the dividend paid to the Sky shareholders was £750m (pure profit) so we can conclude that the re-investment for future technologies etc was £323m. I agree it's vitally important for companies to continue to evolve and grow to provide better (and cheaper) services to their customers.


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3. There are other companies that offer subscription cable or satellite TV services, both in the UK and all around the world. In my experience both here and abroad the only one I have found which offers a completely advertising-free service is the BBC, which has a substantially different operating model to the others anyway. Do you regard all these other companies with the same distaste or is this reserved for SKY alone? If so, why?

You're right, Sky from a business perspective has been extremely well run. Murdock prior to his removal due to the phone hacking scandal was doing an excellent job for the company - his successor has big shoes to fill. Even during the recession Sky has shown impressive growth (9% increase in revenues).

A products value is what people are willing to pay.

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Disclaimer: The above post maybe tongue in cheek.

"I thought I'd get your theories, mock them, then embrace my own. The usual."

No Shumi next yr...NO Sky sub......will watch BBC whenever

Not meaning to be pedantic but this differs somewhat from your original position that you wouldn't consider paying for adverts. If you now say that reducing subscription costs while keeping ads in is acceptable then it simply becomes a matter of cost, not content.

And pardon me for saying so but your position seems a little naive. There doesn't appear to be any logical business reason to remove adverts or reduce subscription costs, since the very profitability that you resent demonstrates that there is a substantial appetite among the public for such a service. Any CEO proposing to reduce income on the basis that "we have enough profit now" would likely end up having to rework his or her CV at very short notice. And the money that they make enables them to consistently provide a professional and varied service which lesser revenue might not allow. I've lived in mainland Europe for example and the difference in quality between their services and the ones here in the UK is night and day, with everything from hardware to EPG to programming choice and variety. You get what you pay for.

I choose not to pay to watch adverts and couldn't understand why someone else would, in the process of this discussion I can see now why others choose to do so, so I am richer for this discussion.
Of course its a matter of cost for me as I said before, it was someone else who went off at a tangent to suggest it was a moral position.

I suppose you could condense it to say that since I do not place a high value on TV I won't pay a high cost for it, whereas someone who places a higher value on TV would be willing to pay a higher cost. I choose not to pay to watch ads and I stand by this.



It's a matter of perspective. From a business perspective everything you have said is true and if you are a shareholder or have some vested interest in the company it's great news. But should we really be looking at this from the perspective of the business? no, of course not, we are customers (or potential customers). I have proposed the argument that Sky could remove adverts from their service and still make a significant profit to it's customers and this would present significantly better value for money.

Yup, that's pretty much my point. So if I didn't swap from Virgin to Sky I'd be stuck paying for crappy SD coverage. Ridiculous.

If they have a HD channel next year I'll happily pay on Virgin, but I'm not paying for SD.