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Amstrad to Supply HD DVRs to Sky Italia

August 22, 2011

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UK-based pay satellite operator BSkyB will provide set-top boxes (STBs) for Italian pay satellite operator Sky Italia, via its in-house STB manufacturer Amstrad. Currently, BSkyB manufactures and supplies HD DVR boxes for purely its own use, within the UK and Ireland, but now BSkyB’s latest HD DVR box, the BSkyB 890 (Amstrad label DRX890) has been made available to Sky Italia. Both Sky Italia and BSkyB are subsidiaries of News Corp, with News Corp currently holding a 39.1 per cent controlling interest in BSkyB.

In June 2006, a year before it was taken over by BSkyB, Amstrad plc had started shipping out the DRX700i, its first HD standard set top box based on Connexant chips, to Sky Italia. Since its acquisition by BSkyB, Amstrad has become the exclusive supplier for HD DVR boxes to BSkyB in both the UK and Ireland; although it has continued to supply standard SD Boxes to Sky Italia in the meantime. Due to BSkyB's discontinuing of all other set-top types, Amstrad has become the sole supplier to the company. Now that Amstrad's latest box is available to Sky Italia, the exclusivity that has been built up between Amstrad and BSkyB no longer exists – and perhaps BSkyB, via Amstrad, are about to make a greater STB play.
Sky Italia had previous deals with Pace and Samsung for HD DVRs, supplying approximately 350,000 units in 2010 and is expected to order 14% more in 2011. However, there are a further six major pay TV operators which are also News Corp subsidiaries: Foxtel (Australia); Sky Network Television (New Zealand); Sky Deutschland (Germany); and Tata Sky, Hathway Cable and Datacom (India). Each of these subsidiaries currently receives their HD DVR boxes from one or more of either Humax, Pace or Samsung. Should it be decided, due to economies of scale, that it is more efficient for Amstrad to provide HD DVR boxes for each of these operators, it could have consequences for rival STB manufacturers.
In 2010, Amstrad shipped just below 3m HD DVRs to BSkyB, whose demand this year is expected to be 2.8m. The total demand for HD DVRs by the all News Corp subsidiaries would make 3.8m units in 2011 – an increase of approximately 1 million boxes. If News Corp were to internalise this supply across the board it would net Amstrad an additional €238m in revenues, and cause a near identical net loss amongst Humax, Pace and Samsung combined. This would be further reduced as economies of scale and internal costings were taken into account within News Corp.
There is currently no indication that Amstrad will take over all production of SD boxes as well – and with the SD STB market so commoditised, there would be little gain in this anyway. Since 2006 the revenues associated with HD DVR shipments has increased by 85 per cent, whilst over the same time period SD boxes have shown a 64 per cent decrease.
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