BSkyB’s (NYSE:BSY) profit fell 10 percent to £815 million ($1.7 billion) from £877 million ($1.8 billion) for the first half of 2007 due to the cost of building out a broadband network - but the strategy is leading to more customers and the group grew revenue 10 percent to £4.5 billion ($9.2 billion).

Since BSkyB acquired ISP Easynet in 2005, it has been busy extending its broadband capability, and this year spent £49 million ($100 million) on marketing the service, leading to the consumer broadband unit loss of £169 million ($346 million). Investments will continue next year. But broadband subscribers grew 57 percent, or by 259,000, in the latest quarter alone, to 716,000; 33 percent of the customers added in that period were newcomers to Sky, with 71 percent of them going on to take a further paid package.

Gambling service Sky Bet recorded 27 percent better annual revenue at £47 million ($96 million) on general growth in the U.K. internet and interactive TV betting scene. Subscribers for the Sky+ PVR system grew by 821,000 to 2.4 million, meaning 28 percent of all viewers now have non-linear viewing habits. HD subscribers grew by 254,000 from a low base to 292,000. First indication Sky’s failure to renew a deal to carry its channels on the rival Virgin Media platform is hurting: a £16 million ($32 million) drop in wholesale subscription revenue and three percent drop in advertising revenue attributed directly to the spat, plus a forecast for a £15 million ($30 million) loss if Sky’s channels don’t return to Virgin in 2008.

Sony JV: Sky also used its earnings to announce a joint venture with Sony Computer Entertainment Europe that will create an on-demand video download service for Sony’s PSP. Due for launch early 2008, the UK/Ireland service will offer movies, entertainment, music, sports and animation from both Sky and third-party channels, downloadable wirelessly or via PC.

Earnings elease | Webcast