Thanks Jondav and Resonance for putting the argument so eloquently..this whole discussion is a big waste of time and I'm sorry to have opened it up.
Sky have fixed costs and every subscriber is an extra amount of income so they go as low as they want to hook people.
If some people want to pay over the odds for the same service then that's up to them, and I'm very grateful to Neil for paying over the odds because of his principles, thus allowing me to get cheapish internet....Thanks on behalf of Rupert too...

In reply to a post by Stevenage_Neil:

In reply to a post by BatBoy:

Do you have any evidence for this?

Take Sky TV. It costs Sky just the same to transmit their channels to one customer as it does to transmit to 10M+ customers. In a fair, transparent, world Sky's costs would be equally shared across it's customer base., We all know it isn't.

Sky have such a huge margin on their costs do you really think they make a loss on these retention deals. Of course they don't. I recently had a year of Sky TV for half price - all that means is they made less profit from me for a year than they made from a full paying customer. The point is though - they would still have made some profit from me.

In reply to a post by Squirrel:

I recently had a year of Sky TV for half price - all that means is they made less profit from me for a year than they made from a full paying customer.

I would say that the "full paying customer" is subsidising Sky's profit margin, (generally fixed and subject to scrutiny), favouring the hagglers.

In reply to a post by Stevenage_Neil:

In reply to a post by Squirrel:

I recently had a year of Sky TV for half price - all that means is they made less profit from me for a year than they made from a full paying customer.

I would say that the "full paying customer" is subsidising Sky's profit margin, (generally fixed and subject to scrutiny), favouring the hagglers.

Nobody is subsidising anybody else. That simply isn't the way the business model of Sky works on the TV side of things.

Sky's costs are virtually "fixed" in terms of providing their TV services. Once Sky hit a break even figure, most after that figure is profit. If Sky don't hit their break even figure on TV supply costs, they would lose money. So assuming Sky hit the break even figure, any customer paying less than another customer is simply contributing less to Sky's bottom line than the customer paying more.

You could even argue that "hagglers" are protecting full paying customers from having to pay more, with a very simplistic illustration of how that could be:-

Sky fixed costs = £1.00
Sky full paying customer charge = £0.75
Therefore Sky loses £0.25 and has to increase charge by £0.25 so the full paying customer has to pay more.

Alternative
Sky fixed costs = £1.00
Sky full paying customer charge = £0.75
Sky customer that haggled charge = £0.50
Therefore Sky then makes a profit, and the full paying customer doesn't get a price increase.

So it could be argued that "hagglers" are actually subsidising "full paying customers" by protecting them from having to pay even more.

Full paying customers should thank those that haggle IMO, as us hagglers are keeping their prices down.

They dont haggle enough plenty of room for more haggle, as SKYPLC reported in September, operating profit of £316m, an 11% jump on the same period last year and 6% rise in revenue to £1.9bn in the three months to 30 September 2014.

http://www.bloomberg.com/quote/SKY:LN/chart

In reply to a post by NilSatisOptimum:

They dont haggle enough plenty of room for more haggle, as SKYPLC reported in September, operating profit of £316m, an 11% jump on the same period last year and 6% rise in revenue to £1.9bn in the three months to 30 September 2014.

http://www.bloomberg.com/quote/SKY:LN/chart

Sky over the last few years have actually seen their profits mainly decrease. In fact Sky made less profit Y/E June 2014 than they did Y/E June 2010. Only 1 year in the last 5 have Sky made less profit (2011) than they did in Y/E June 2014.

Also the Operating Margin of Sky has decreased considerably over the last few years. Their OM was the lowest for years in Y/E June 2014 @ 15.21% (e.g. the OM in Y/E June 2010 was 19.50%).

So the conclusion "plenty of room for more haggle" seems inaccurate because that would lead to even further decreases in OM and OP for Sky, which is probably one reason why Sky are now playing hard ball on retentions, to try and reverse the trend of decreasing margins and profits.

Edited by deleted (Sat 03-Jan-15 23:27:54)

That runs on the assumption that everyone who grabs a deal would've gone elsewhere or elected not to take any Sky channels via any operator otherwise, and Sky would receive zero revenue from them if they had gone elsewhere.

It also assumes that Sky's cost base is entirely fixed, which it is not. Variable costs include CPE and Openreach rental charges, along with costs to Sky of some third party channels sold to them on a per-viewer basis.

When deals are low enough Sky would actually receive more profit from customers leaving them and taking Sky channels from another operator, however churn is a very big metric for Sky and, hence, they take a loss of profitability or outright loss to keep this down.

EDIT: As it is it looks as though at least part of the motivation most recently has been to make the company more attractive to a potential suitor...

Edited by deleted (Sat 03-Jan-15 17:15:37)

Share price is a steady healthy increase, a few peaks and troughs normally around football rights time, over 5yrs, up and up and now currently seen as "fully valued".

In reply to a post by Ignitionnet:

That runs on the assumption that everyone who grabs a deal would've gone elsewhere or elected not to take any Sky channels via any operator otherwise, and Sky would receive zero revenue from them if they had gone elsewhere.

No "assumptions" at all, just merely facts on the business model that the TV side of Sky operates on. Once "break even" is met, from then on revenues are mainly profits. So no subsidising by anyone of anyone else, just merely some contribute less to Sky's bottom line than others once the "break even" figure is breached.

In reply to a post by Ignitionnet:

It also assumes that Sky's cost base is entirely fixed, which it is not. Variable costs include CPE and Openreach rental charges, along with costs to Sky of some third party channels sold to them on a per-viewer basis.

Seeing as I wasn't referring to anything else but the TV side of Sky (as you can see by the reproduction of a key phrase in a previous post, put below), that point is completely irrelevant in the context of what I put.

In reply to a post by JonDav:

That simply isn't the way the business model of how Sky works on the TV side of things.

In reply to a post by NilSatisOptimum:

Share price is a steady healthy increase, a few peaks and troughs normally around football rights time, over 5yrs, up and up and now currently seen as "fully valued".

Share price gains or losses are meaningless to a degree, unless you compare the performance with an index over the same time frame (so the FTSE 100 Index in the example of Sky). Also with Share Price movements time frame can give a very selective and sometimes false picture.

So for example with Sky compared to the FTSE 100 index over 3 months shows it has just about under performed the FTSE 100 index approx. 50% of the time, and over the entire 3 month period Sky has just about matched the FTSE 100 index. You can select other time periods and run a similar comparison. So, for example, the Sky SP is less now than it was 6 months ago (but in context, so is the FTSE 100 index overall).

Share prices very often reflect macro factors (hence the falls lately just based on the oil price), than the real "worth" of any particular company. Personally I think a lot of macro worries that depress a lot of shares are irrelevant to a lot of companies, but those companies may get marked down anyway based on herd mentality.