BSkyB likely to feel the pressure next year
The pay-TV company beat our expectations for fiscal 2009 but we expect to see revenue growth slowing as competition increases going forwards
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BSkyB's operating margin, before depreciation and amortisation, was spot on with our estimate at 20.1%. Costs for content increased 2% during the year, but its biggest competitor for sporting content--Sentanta Sports--went under in June. While this might sound like a good thing at first, the auction for its assets brought ESPN into the market. BSkyB has recently extended several of its major sporting contracts, which puts it in good stead for the next couple of years. We expect competition for the next round of renewals will be much more intense with ESPN in the mix, however, slowing margin expansion in two or three years.
Allan C. Nichols, CFA, is a Morningstar senior stock analyst and international investing specialist based in the United States.