UK based digital TV set top box manufacturer, Pace Micro Technology, has revealed the details of its new contract with BSkyB. Pace will continue to manufacture the Sky+ personal digital video recorder. However, the company will have to supply the recorder at below cost price until next April. In return, Pace will take a cut of the £10 monthly subscription fee that Sky+ users pay for the service.
Pace announced that the new deal would allow Sky to reduce the price of the Sky+ service to encourage greater interest among subscribers. Pace hopes that this will benefit the company in the long term. Only 25,000 Sky+ personal digital video recorders have been sold to SkyDigital’s 5.9 million customers. The recorders currently cost £300 in addition to the £10 monthly subscription.
News of the new deal caused Pace’s shares to fall 44% amid fears that the deal would slice millions from the company’s profits. Analysts believe that the BSkyB deal will cut Pace’s profits by around £1.7 million. The company was expected to generate profits of £17.1 million in this financial year. Shares in Pace have already been badly affected by the financial troubles at NTL which forced Pace to postpone a shipment of set top boxes.