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British Sky Broadcasting SWOT & PESTLE Analysis

ID : 52335653 | Jan 2018

OVERVIEW

Name of the Company: British Sky Broadcasting

Business Sector: Media and Entertainment

Operating Geography: Europe

About the Company: British Sky Broadcasting has been rebranded as Sky after the acquisition of its sister companies in Germany and Italy. The takeover of the sister companies has turned the company into a pan-European TV giant with 22.5 million customers in the UK, Ireland, Austria, Germany and Italy. The company has revenues of 12.9 billion pounds with an operating profit of 1.5 billion according to the latest annual report ,2017.

Revenue: £12.9bn– FY ending Jun 2017

Competitive Analysis of british sky broadcasting

The SWOT analysis for British Sky Broadcasting is presented below:
Strengths
Weaknesses
1. Strong growth in key Operational performance indicators
2. Strong Flagship Brands
3. Strong content available across the Brands.
4. Substantial Strategic Investments to develop innovative industry leading products.
1. Slow rise in Advertisement revenues and customer base
2. High cost of acquiring content
Opportunities
Threats
1. Potential in Untapped Markets
2. Multi-year partnership worth $250m with HBO for co-production of television drama
3. Customers preferring digital formats for viewing content.
1. High Competition
2. Uncertainty regarding Fox takeover bid
3. Uncertainty over Disney-Fox deal

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Strength

1. Strong growth in key Operational performance indicators: Sky has shown strong performances in some key performance indicators like connected homes: the homes that connected their Sky box to internet which gave them access to Sky’s on demand services. The connected homes showed a growth of over 1.1 million in the last year taking the total number to 12 million which amounts to over 57% of all TV customers making Sky as Europe’s largest connected platform. Other key indicators like average quarterly reach which depicts viewers that watch at least one Sky-owned channel showed a growth of 4%, taking the total viewers to about 100 million in each quarter.

2. StrongFlagship Brands: Sky has some strong flagship brands like Sky Sports, Sky Atlantic, and Sky Cinema that show some of the best acquired content as well as some of the best original Sky productions.

3. Strong content available across the Brands: Some strong content in the form of original production or acquired ones have helped increase the reach of sky channels. Show like Riviera, downloadedover 12 million times make it the most popular premier box set release ever. In Italy, drama 1993 was the second best performing series after the show ‘The Young Pope’.

Sky renewed their long term partnership deals with some leading channel providers like NBCUniversal, Discovery and A+E networks which ensured the customers get some of the best content available worldwide.

Some important sports rights deal like the premier league deal, partnership with England and Wales Cricket board that gave rights to live international matches and county cricket, Rights to women’s cricket and netball have helped Sky get a strong position in UK market.

In Germany and Austria, Sky renewed the right to show live UEFA Champions league matches for next 4 years. In Italy, Sky has won the rights to show live UEFA Champions league and Europa league matches making it the leading sports service in Italy.

4. Substantial Strategic Investments to develop innovative industry leading products: Sky has invested substantially into developing innovative products that have created a future revenue stream for Sky in the long term. Sky introduced Sky+ Pro in the Germany and Austria markets with around 460, 000 homes availing the services of the product while they enhanced the already leading Sky Q in the UK market with advanced features like voice search, personalisation features and advanced UHD content.

In the communications area, Sky has been able to leverage its brand strength and leading customer service to launch Sky Mobile and create another revenue and future profit stream.

Weakness

1. Slow rise in Advertisement revenues and customer base: Advertisement revenues of Sky were up by 4% in the nine months to 31st March 2017, as against the 7% growth in the same period of the previous year which lead to a drop of 3%. Sky added just a total of 40, 000 Subscribers in the three months ending March 2017 as against the total of 70,000 subscribers in the same period last year indicating that customers are increasingly favouring cheaper options like Netflix.

2. High Cost of acquiring content: Rising cost of sports rights have resulted in stressed profits for Sky in recent years. The premier league Rights deal of 4.2 billion pounds led to fall in profits by 14% for its UK and Ireland operations. The bidding war between Sky and Its competitor BT sport has driven up the costs by over 70% and this forced Sky to pay 83% more to secure the prime games. This bidding war also saw Sky losing out on the UEFA Champions league rights for UK market to BT sport which paid 1.2 Billion pounds for it.

Opportunity

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Threat

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References

1. BSkyB to be rebranded as Sky after takeover of European sister companies: https://www.theguardian.com/media/2014/nov/13/bskyb-rebranded-sky-takeover-british-rupert-murdoch

2. Sky announces HBO co-production deal: http://www.bbc.com/news/business-39651301

3. Sky suffers marked slowdown in core UK pay-TV business: http://www.telegraph.co.uk/business/2017/04/20/rise-premier-league-costs-hits-skys-profits-despite-rise-revenues/

4. Sky reports slower rise in ad revenue: Read more at https://www.campaignlive.co.uk/article/sky-reports-slower-rise-ad-revenue/1430938#wCQepmJxWUJeEG06.99

5. Sky faces paying extra £1.8bn for Premier League broadcast rights: https://www.theguardian.com/media/2017/aug/11/premier-league-broadcast-battle-hots-up-as-sky-face-doling-out-extra-600m

6. BT Sport get Champions League and Europa League TV rights in £1.2bn deal as UEFA choose revenue over ratings: http://www.dailymail.co.uk/sport/football/article-4287456/BT-Sport-Champions-League-Europa-League-TV-rights.html

7. Competition watchdog delays initial verdict on 21st Century Fox's Sky deal: https://www.theguardian.com/media/2017/dec/06/competition-watchdog-21st-century-fox-sky-takeover-deal-murdoch

8. Disney-21st Century Fox Negotiations Add Uncertainty to Fox’s Sky Takeover Bid: http://variety.com/2017/biz/news/disney-fox-adds-uncertainty-fox-sky-takeover-bid-1202631195/

9. A Sky anxiety: does Disney share Murdoch's love of news?: https://www.theguardian.com/media/commentisfree/2017/dec/17/a-sky-anxiety-does-disney-share-murdochs-love-of-news

10. Sky plc annual report: https://www.skygroup.sky/corporate/articles/annual-report-2017

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The PESTLE/PESTEL analysis for British Sky Broadcasting is presented below:
Political
Economical
1. Ongoing investigation into Fox takeover bid of Sky1. Rising costs of acquiring content
Social
Technological
1. Changing customer service delivery
2. Growing demand to view channels through multiple platforms
1. Substantial investments to create new products
2. Creating future revenue streams through new innovations
Legal
Environmental
1. Decisions regarding ongoing investigations of regulatory matters that involve the group
2. Change in regulatory laws and compliance
3. Rising piracy and violation of intellectual property laws
1. Initiatives to reduce the carbon footprint of the group
2. Initiatives like Sky Ocean rescue that encourage and inform customers about the health of the oceans
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Political

1. Ongoing investigation into Fox takeover bid of Sky: The £11.7bn takeover bid by Fox to get the remaining 61% stake of Sky has been referred to the UK competition watchdog CMA. The bid has been cleared by the EU authorities but still needs approval from the CMA to proceed. The CMA has delayed its decision by a month in December 2017. Also the deal by Disney to purchase Fox’s assets which would include Sky has also shed the doubt on its future, with the future of Sky news particularly in doubt if the deal by Disney goes through.

Economic

1. Rising cost of acquiring content: The rising costs of getting the rights to events like premier league deal due to excessive bidding war by rivals has led to reduction in Sky’s operating profit and also losing out on the right to UEFA champions league and Europa league matches to BT sport which won it by paying close to £1.2bn.

Further increase in the costs in the future can lead to significant reduction in profits for Sky.

Social

1. Changing customer service delivery: Customer Service is one of the main parameters affecting the entertainment industry. The changing ways in which customers expect service from the company due to rise in multi-platform channels has made Sky focus on the customer service delivery aspect with the introduction of digital service apps across all its territories to address consumer demands. An example of it is the My Sky app in UK through which 50% of all consumer interactions take place. This has enabled Sky to maximise consumer satisfaction while reducing costs.

2. Growing demand to view channels through multiple platforms: With more and more customers preferring to view content through multiple platforms like the digital format, Sky has had to adapt to the changing needs of customers to stay competitive. Sky risks losing out on business to cheaper alternatives like Netflix as people increasingly prefer viewing content on the go.

Technological

This section is available only in the 'Complete Report' on purchase.

Legal

This section is available only in the 'Complete Report' on purchase.

Environmental

This section is available only in the 'Complete Report' on purchase.

References

1. Competition watchdog delays initial verdict on 21st Century Fox's Sky deal: https://www.theguardian.com/media/2017/dec/06/competition-watchdog-21st-century-fox-sky-takeover-deal-murdoch

2. Disney-21st Century Fox Negotiations Add Uncertainty to Fox’s Sky Takeover Bid: http://variety.com/2017/biz/news/disney-fox-adds-uncertainty-fox-sky-takeover-bid-1202631195/

3. BT Sport get Champions League and Europa League TV rights in £1.2bn deal as UEFA choose revenue over ratings: http://www.dailymail.co.uk/sport/football/article-4287456/BT-Sport-Champions-League-Europa-League-TV-rights.html

4. Sky Mobile: https://www.sky.com/shop/mobile/features

5. Ocean Rescue: UK needs plastic bottle deposit return scheme, MPs say: https://news.sky.com/story/uk-needs-plastic-bottle-deposit-return-scheme-report-warns-11180525

6. Reducing our emissions: https://www.skygroup.sky/corporate/bigger-picture/responsible-business/environment

7. Sky makes 3 major commitments in its next phase of ocean rescue campaign: https://skyoceanrescue.com/sky-makes-three-major-commitments-in-next-phase-of-its-sky-ocean-rescue-campaign/

8. Sky plc annual report: https://www.skygroup.sky/corporate/articles/annual-report-2017

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Walt Disney SWOT and PESTLE analysis has been conducted by Nikita Dhar and reviewed by senior analysts from Barakaat Consulting.

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