Sky TV chief executive John Fellet put higher 'churn' down to the conclusion of the Rugby World Cup.

For the first time in 10 years, Sky Television is spending more than a third of the money it gets from customers on buying and making programmes.

But that appears to compare poorly with internet-based companies which spend a much higher proportion of their revenues on programming.

Planned improvements to Sky's service this year include more "catch-up" programming on Sky Go and HD content on Neon, chief executive John Fellet said.

But television viewers often aren't shy about saying whether they think Sky Television provides value for money, so where does your dollar go?

MAKING CENTS OF SKY

The average Sky Television customer spends just under $80 a month on its service.

Competition from internet television companies was forcing it to pay more to secure programming rights, Fellet said.

Of each dollar spent on Sky, 34 cents went on making and buying programmes during the second half of last year. That was up from 32c in the year to June 30.

Another 18c is profit (down 1 cent) and 7c went in tax.

About another 40c in every dollar goes on Sky's many other operating costs.

These include buying satellite transmission capacity, installing and servicing set-top boxes, customer service and billing, and finance costs.

THE DOLLAR DEAL

Sky's profits seem high.

But more the worry may be its operating costs, which go with the territory as a satellite television provider.

Online music service Spotify dishes out almost 70 per cent of its revenues in royalties to artists, while internet television company Netflix spends more than 50 per cent of its subscription revenues buying in or making programmes.

With Sky's programming costs sitting at 34 per cent of revenues, its business model looks inefficient by comparison.

However, if all television was watched online, New Zealand broadband networks would be swamped, given that fewer than 10 per cent of households have so far switched to ultrafast broadband.

VOTING WITH YOUR REMOTE

Greater competition may be pushing up Sky's costs, but it is not (yet) causing many customers to desert Sky for ever.

Fellet said its satellite-TV subscriber numbers were down slightly during the second-half of last year.

But the decline was small enough to be more than compensated for by growth in its Neon and Fan Pass businesses and a tiny 13c increase in customers' average monthly spend.

Strong immigration will have helped Sky keep its numbers steady, Fellet conceded.

Sky TV's profits for the six months to December 31 fell 6 per cent to $87 million because of the higher programming costs, but revenues edged up 2 per cent to $476m.

Under the bonnet, Sky's financial report suggests a large and growing number of Sky customers may be letting their Sky subscriptions lapse only to return later.

Annualised "customer churn" is running at 15.4 per cent, up from 14.5 per cent at the end of June.

Fellet said he was disappointed by that increase, but noted churn always increased in the wake of the conclusion of each Rugby World Cup.

The roll-out of Sky's OnDemand service, which lets its satellite-television subscribers call up programmes to their set-top box over the internet, had got off to a good start, he said.

That was despite feedback that "a small percentage of customers have difficulty reading the new interface", he said. Sky is now testing a new electronic programme guide which is designed to be easier to read.