Editorial: Life, not just Christmas

This Christmas more than 160,000 people won't have to play along with the charade of rattling their gift and asking 'I wonder what it is?' It's a Sky set-top box.

Christmas has come early at BSkyB - two weeks early, to be precise. Chief executive James Murdoch is so excited to have hit his 8m subscriber target that the news was revealed even before the presents had been unwrapped. At least the City will have time to react favourably to the news before heading home for the holidays.

It is fortunate that Freeview has greater respect for yuletide tradition, otherwise the surprise could have been ruined for many more. The BBC waited until mid-January this year before revealing unofficial estimates that 1.5m Freeview boxes had been sold in the three months leading up to Christmas 2004. Given that a similar sales ratio is likely to be repeated this year, one can hardly blame Sky for wanting to get its revenge in early with the 8m subscriber announcement.

It would have been hard for Sky to fail to reach the promised target between October and December. Last Christmas it added 192,000 subscribers; this year it needed just 156,000 to break the 8m mark. The company has been heavily promoting its discounted introductory prices, and more recently has been offering the Sky package as a £149 Christmas gift. Observers have long asserted that Sky would achieve its 2005 subscriber target whatever the cost, as the penalty inflicted by investors for falling short would have been far greater.

No sooner has Sky passed one milestone than another looms on the not-too-distant horizon.

It aims to sign up 10m direct-to-home subscribers by 2010 and it is not the type of company to blithely set unobtainable goals. As ambitions go, 400,000 net subscribers in each of the next five years is not especially challenging. It signed up 401,000 in 2004, down from 646,000 in 2003.

We don't yet know the end-of-year subscriber numbers for Sky, but an estimate of 450,000 is not unreasonable.

So what does it matter whether Sky hits its subscriber target or not?

It can make up any shortfall with tactical discounting. What the 2010 target does demonstrate is how hard Sky is having to work to maintain current growth levels. Much is being made of the company's £211m takeover of Easynet, with Murdoch emphasising Sky's strengthened position in entertainment and communications.

The company has also made clear its financial determination to keep as many Premier League football matches as it can after the forced break-up of the rights package - the 2m viewers who tuned into Sky Sports 1 for the Arsenal-Chelsea clash on Sunday providing timely justification for the strategy.

Finally, the company continues to push its Sky+ box, aiming to upgrade 25% of its customer base to the service by 2010. It hopes that this, combined with products such as the multiroom package, will drive up revenue per user, and skim off the top level of Freeview users attracted by the idea of an enhanced service.

So let us allow Sky its moment of early Christmas cheer - it may be brief.

With Freeview figures just around the corner, Sky faces a long battle to convince viewers of the benefits of subscription TV.

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