International Satellite Broadcasting Service

British Sky Broadcastin is the first entrepreneurial venture of any significance to have challenged the hitherto closely regulated, four-channel, public service character of British television. As part of Rupert Murdoch's international media empire that includes the Fox network and Star TV, BSkyB has rapidly become a major player in the world broadcasting market-place. It is a large commercial satellite network, available principally to viewers in the British Isles but capable of reception anywhere within the European ASTRA satellite system footprint.

Forty per cent owned by News International and successfully floated on the British Stock Exchange as a public company at the end of 1994, BSkyB is instantly associated with Murdoch who invested heavily in the venture from 1983, accepting enormous initial losses while waiting for satellite television in Britain to become profitable. Although many other satellite services are available to British audiences, the wide choice offered by BSkyB's continually expanding package of channels is undoubtedly the main incentive to satellite antenna acquisition; the network has come to be regarded by the terrestrial broadcasting sector as the true commercial competition. In just over a decade from its inception, BSkyB has firmly established itself as the third force in British broadcasting.

The inauspicious origins of BSkyB can be traced to Murdoch's purchase in 1983 of a 65% share (subsequently increased to 82%) in a fledgling London-based operation called Satellite Television Ltd which, as the first European satellite television channel, had been transmitting programmes for about a year to small audiences in Western Europe over one of the earliest EUTELSAT satellites. Murdoch, who has described satellite television as "the most important single advance since Caxton invented the printing press," re-launched the company as Sky Channel and commenced broadcasting a new programming mix in January 1984, receivable in Britain only by cable households (at that time no more than about 10,000). By 1987 Sky had achieved an 11.3% share of viewing in those homes capable of receiving it and had raised some 28 million in rights issues to fund its planned expansion into direct-to-home delivery.

Sky's expansion, widely criticised at the time as irresponsibly risky, began in February 1989 when the company's new three-channel package went on air over the first Luxembourg-owned ASTRA satellite. Indeed, since UK broadcasting legislation did not then permit a satellite undertaking to uplink signals from British soil, Sky was only legally able to do so by virtue of its non-British transmission source. At first available unscrambled and free-of-charge, the original Sky package consisted of a premium film channel (Sky Movies), a 24-hour news channel (Sky News) and a general entertainment family channel (Sky One). This package, however, experienced a very slow initial take-up by the British public for a number of reasons, the main one being that many potential customers were holding back pending the heavily advertised launch of the rival satellite service, British Satellite Broadcasting (BSB), which promised subscribers an attractive range of alternative benefits with a distinctly British cultural emphasis.

The rise and fall of BSB represents something of a fiasco in broadcasting deregulation, but in retrospect can be seen as an unprecedented opportunity for the entrepreneurship of Rupert Murdoch's Sky. This organisation, specially provided for in the British Government's Broadcasting Act of 1990, was licensed as the official Direct Broadcast by Satellite (DBS) provider, legally enabled to uplink from British soil and established as the direct competitor of Sky. BSB was claimed to possess an enormous technological advantage over its rival in that it would use a much higher powered satellite with the more technically sophisticated D-MAC transmission standard delivering a higher fidelity TV picture than Sky's inferior (but more affordable) PAL standard. BSB's two Marco Polo satellites (at an astronomical cost of some 500 million each) were duly launched from Cape Kennedy by Space Shuttle between August 1989 and early 1990, by which time Sky had been consolidating its audience for over a year. After several embarrassing delays, BSB launched on 29 April 1990 and its five-channel service competed uneasily with Sky throughout the summer and autumn of 1990 but was even slower than Sky to attract consumer interest. On 2 November 1990 (ironically the day after the Broadcasting Act was finally passed), BSB suddenly collapsed, recognising that the market could not sustain two such capital-intensive satellite operations in competition. Without the permission of the Independent Broadcasting Authority, Sky immediately announced a merger with BSB to form the BSkyB network. Though this was, in effect, a serious breach of BSB's contract, the merger (in effect, a take-over) was allowed to proceed in the best interests of viewers and transitional arrangements were put in hand to compensate dispossessed BSB subscribers so that a five-channel service would continue to be available to them via Marco Polo until the end of 1992 but provided by the new BSkyB organisation.



Freed from non-terrestrial competition, BSkyB was now in a position to rationalise its activities, especially in the area of subscription services. It immediately re-launched BSB's Movie Channel, having acquired the rights to an expanded cartel of Hollywood feature films, thus giving itself greater flexibility and market domination in movie scheduling. In October 1992, the company replaced a short-lived Comedy Channel experiment with a third movie channel, Sky Movies Gold, dedicated to classic films. Then, in September 1993, BSkyB introduced its most aggressive market move to date when it announced the "Sky Multichannels" subscription package with various price options to suit viewer preference. By now a Sports Channel had been added to the network, later to be followed by Sky Sports 2, Sky Travel and Sky Soaps. Interestingly, the Multichannels package also included a number of competing English language ASTRA channels, such as Discovery, Bravo, Children's Channel, Nickolodeon and QVC which pay BSkyB a premium for the use of its patented VideocryptT decoding technology. Hence BSkyB cleverly generates revenue, not only from its own programmes but also from those of its immediate competitors.

Rupert Murdoch initially regarded the Sky satellite venture as a five-year risk to profitability from 1988. After gigantic early losses which would have deterred more timid investors, the company had already begun to move into profit by early 1992 and has since built itself into an extremely valuable and powerful business. In the five months between June and November 1993 alone, BSkyB experienced an impressive 30% increase in its operating profit and has continued to thrive with the gradual increase in satellite dish penetration. More recently, much to the chagrin of terrestrial broadcasters, the network has concentrated on purchasing exclusive rights to major sporting events in the hope of attracting many new subscribers. In the late 1990s, digital television will undoubtedly offer BSkyB new opportunities but it is also likely to usher in serious competition from new satellite ventures. BSkyB has, however, become so well established as part of an enormous vertically-integrated international media empire that it will probably continue to maintain its market advantage unless cross-media ownership rules eventually place debilitating constraints on its potential.

-Tony Pearson


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See also Murdoch, Rupert; Satellite