BSkyB is to increase its annual entertainment programming budget, mainly for flagship channel Sky One, by £10m despite the pressure to cut costs as ad revenues decline.

Sky is bumping up its budget by around 7% year on year for its entertainment services - which also include Sky Two, Sky Three and Sky Real Lives - an increase from around £150m to £160m for the coming year.

In the year to the end of June, Sky spent £205m on its news and entertainment programming, an increase of £21m on 2006-2007.

It is thought that Sky News accounts for around £55m of the total budget, with entertainment programming taking the rest.

Most of the entertainment programming budget is directed at Sky One, which in the last year commissioned shows including Gladiators, Terry Pratchett's Colour of Magic and Ross Kemp in Afghanistan.

"The fundamental reason why consumers upgrade to pay TV is to enjoy a better choice of content," said the BSkyB chief executive, Jeremy Darroch, today.

"No one is better placed than us to persuade free-to-air homes to make that switch. That is why we continue to invest in and build on our core proposition as the home of content people love."

Darroch also highlighted Sky+, the company's personal video recorder set top box, as the star performer in its annual results announced today.

Sky+ net customers grew by 1.34 million over the year to the end of June, to a total of 3.71 million out of BSkyB's total UK and Ireland customer base of around 9 million.

Darroch said that the PVR was acting as a key hook to attract customers to BSkyB - 55% of the 321,000 Sky+ subscribers in the fourth quarter were completely new customers for the company.

He added that there was a great opportunity to improve on the 11% of Sky customers that took a bundled package of telephone, broadband and TV services.

Darroch said that if the company could double that to around 20% of its customer base it could mean an extra £120m a year in revenue.

Some analysts have questioned whether BSkyB will continue to be able to attract significant numbers of new subscribers and hit its target of 10 million by the end of 2010.

However, Darroch sounded an optimistic note today. "The outlook is more challenging than it has been for some time.

"But there are 14m households in the UK that don't take a subscription service. TV is a very enduring product, people are watching as much today as 10 years ago," he said.

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