Owned 36.3 percent by News Corporation and successfully floated on the U.K. and U.S. stock exchanges at the end of 1994, BSkyB is immediately associated with the name of media tycoon Rupert Murdoch, who invested heavily in the venture from 1983, accepting enormous initial losses while awaiting the profit potential of satellite television in Britain. Initially with a purely analog service, and subsequently with a dual-illuminated digital/analog service, BSkyB has become the primary nonterrestrial broadcaster in the United Kingdom and is regarded by the terrestrial sector as the true commercial competition. In just a decade and a half of wide consumer access, the network 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 percent share (subsequently increased to 82 percent) in a fledgling, London-based operation called Satellite Television Ltd., which, as the first European satellite television channel, had been transmitting programs for about a year to small audiences in western Europe over one of the earliest EUTELSAT satellites. Murdoch, who once famously described satellite television as “the most important single advance since Caxton invented the printing press,” relaunched the company as the Sky Channel and commenced broadcasting a new programming mix in January 1984, receivable in Britain by cable households only (at that time no more than about 10,000). By 1987 Sky had achieved an 11.3 percent 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 criticized 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 U.K. 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 in anticipation of the heavily advertised launch of a 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 it can be seen as an unprecedented opportunity for the entrepreneurship of Murdoch’s Sky. BSB, 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 BSB 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 shuttles 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 April 29, 1990. 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 November 2, 1990 (ironically, the day after the Broadcasting Act was finally passed), BSB suddenly collapsed, recognizing 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. Although this was, in effect, a serious breach of BSB’s contract, the merger (in effect, a takeover) 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, now provided by the new BSkyB organization, would continue to be available to them via Marco Polo until the end of 1992.

Freed from nonterrestrial competition, BSkyB was now in a position to rationalize 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 this point, 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, Nickelodeon, and QVC, which paid BSkyB a premium for the use of its patented Videocrypt decoding technology. Hence, BSkyB was cleverly generating revenue not only from its own programs but also from those of its immediate competitors.

Murdoch initially regarded the Sky satellite venture as a five-year risk to profitability from 1988. After gigantic early losses that would have deterred more timid investors, the company had already begun to move into profit by early 1992 and went on to build itself into an extremely valuable and powerful business, with an ever growing slate of channels and a steadily rising customer base. In 1998 BSkyB launched Sky Digital, the first digital TV proposition in the United Kingdom and the fastest, most successful rollout of any European digital service. By September 2001, Sky Digital had attracted 5.5 million direct-to-home subscribers out of BSkyB’s total subscription population of 10.2 million.

The network’s rise to its current preeminence has not been entirely without setbacks; management changes and the capital intensive roll-out of the digital service contributed to temporary downturns in profitability in the late 1990s. Nevertheless, by 1999, the company had entered the list of the world’s top 250 companies. In the six months ending December 31, 2001, revenue increased on the preceding half-year by 22 percent to £1.32 million ($2.24 million) and operating profit by 39 percent to £70 million ($119 million). This growth was achieved in the face of competition in the United Kingdom from both digital terrestrial and digital cable ventures. With more than 250 digital TV and radio channels (including some 75 pay-per-view options) available in 2001, BSkyB’s Sky Digital offered an unparalleled choice of entertainment and information programming supported by a range of interactive services such as e-mail, home shopping and banking, online games, camera-angle selection, and over-the-air voting and betting. Subscribers could select from more than 90 different package options ranging from £10 to £37 per month. A new service, Sky 􏰀, was launched in September 2001, offering viewers the added facility of an integrated Personal Television Recorder and delivering new levels of control over the TV viewing experience.

Undoubtedly the leading digital player in the United Kingdom, BSkyB remains well positioned to respond to future technological and regulatory change. It has become so well established as part of an enormous vertically integrated international media empire that it is likely to maintain its market advantage unless cross-media ownership rules eventually place debilitating constraints on its potential.