BSkyB – One Year On
Before last November , satellite television was a diffused, disparate medium tottering on the fringes of the broadcasting industry.
Whilst many consumers liked the idea of more choice and niche channels, confusion over whether to opt for Sky or BSB (a dish or a squarial) and the mixed messages coming from the broad- casters themselves, blurred the concept of satellite television and most were happy to stick with the familiar, uncomplicated terrestrial channels. The merger of Sky and BSB consolidated satellite television and facilitated the clear message of wider choice through one dish.
At the time of the merger (2/11/90), cable TV was available in 371,000 homes whilst 1.2m homes received satellite direct. Astra channels accounted for over 30% of viewing in homes able to receive them, with Sky itself taking a 25% share. Of the total number of homes receiving satellite, only 175,000 had BSB squarials.
By the end of October 1990, BSB was facing a crisis; it was unable to meet its next sales target, and was having difficulty putting together its next round of financing. Sky, too, was under severe financial pressure. The merger, although it has so far absorbed combined losses of over £1.5bn, has reduced weekly operational losses from a combined £11m before the merger to around £1.5m today.
In financial terms, the merger has been a success; rather than squandering time and money on campaigns knocking the opposition , resources have allowed satellite TV to speak with one voice.
In programming terms , corporate packaging has been so successful as to almost eradicate the BSB name from memory.
BSkyB launched its five channel package – Sky News (combining ‘the best of BSB’s Now channel’), Sky One (incorpor- ating BSB’s Galaxy channel), Sky Movies Plus, The Movie Channel and Sky Sports – in April this year, and concurrently dropped Eurosport from its line-up (putting its stake in the channel up for sale). Old BSB subscribers continue to receive all channels.
The end result has been a virtual monopoly of subscription TV in the UK.
Sky’s obvious strength is its two movie channels and having secured long-term deals with most of the Hollywood studios, the strangle-hold could prove impossible to break. Sky now claims to have 1.3m movie subscribers.
The launch of The Comedy Channel at the beginning of October was intended to deaden the impact of an increase in subscription charges for the movie channels and a recent study suggests that 6% of dish owners who do not currently take a Sky Movie Channel will definitely/probably do so following the launch of the Comedy Channel. However, in the same study, 9% of existing subscribers will definitely/ probably cancel their subscription as soon as possible. In addition to the natural benefits accrued from the merger, the recent TV franchise round has proved a boon for satellite TV , and for BSkyB in particular.
15% of people would now be prepared to invest in satellite TV receiving equipment if their favourite terrestrial TV programmes moved to satellite (as is increasingly likely, with Thames and TVS setting up as independent producers).
Whether by moving wholesale onto satellite , or by selling their established programming on to the satellite broadcasters,franchise losers are likely to push up dish sales.
Moreover, BSkyB’s recent sales and news tie-ups with TV-am (with high profile Tony Vickers appointed as Group Sales and Marketing Director) , place it firmly in the mainstream of UK broad- casting.
The latest figures from Sky claim 2.6m homes accessing via either dish or cable ; the first released Astra data from the new BARB panel puts the homes figure at 2.04m. The latest dish penetration figures from Continental Research cite a total of 10,000 dishes installed in October, and estimate total dish penetration at 1.9m. JICRAR figures to 1/10/91 put cable homes at 444,880. Astra data from BARB for the first weeks of November 1991 gives Sky a 25% share of viewing in receiving homes, and around 37% share of commercial TV viewing.
BSkyB currently has debts of over £1.3bn and is not expected to make ‘significant’ profits before 1994. Despite a rapid increase in up-take since the merger, much now depends on what the saturation point is, and whether it will be reached before BSkyB manages to break even. There can be no doubt, however, that satellite’s image and feasibility, as well as its potential profitability, has been much improved by the merger of Sky and BSB. With a recent Key Note study estimating that satellite will take a 23% share of UK commercial TV audiences by 2000, the future is promising; meanwhile, BSkyB’s virtual monopoly means that it is already a viable advertising medium.