Tuesday, September 30, 2008

Sky Falling In

Yesterday was a bad day for UK satellite broadcaster, BSkyB, with a ruling that it will have to sell  a large block of the shares it bought  in UK broadcaster ITV plc - no doubt at a heavy loss. Was it a price worth paying to prevent the embattled commercial station operator out of the hands of rival distributor, Virgin Media? Probably not.

On the same day, Ofcom announced an enquiry into Sky's dominance of the UK Sports and Movie broadcast markets, with a view to making them wholesale any special deals they have.

Sky's treatment of football fans has been especially shoddy and has resulted in vociferous complaints which is now coming back to hurt them.

In the US, the market situation is reasonably clear - you have wholesalers and distributors - just like in the old days of cinema, and you then have various timeslices of rights.

In the UK the situation is far more complex due to a number of factors, including PBS and the power of the BBC, the relative weakness of commercial channel operators such as ITV and the debt piled onto one of only two real competitors to BSkyB's dominance, Virgin Media.

BSkyB is an aggressive and well run organisation that probably deserves its place at the top of the UK broadcast league (although support from majority shareholder NewsCorp's newspaper titles surely helps). However, this cash cow is getting long in the tooth and it's difficult to see how BSkyB can grow their subscriptions in the current climate. They have been successful in broadband after their inspired purchase of Easynet, but it's difficult to see how this can now be used for anything other than cannibalise their current revenues - not using the internet to extend their client base by making their properties available on PPV or subscription to non-TV subscribers was a serious mistake that can yet be rectified.

One option is to auction their EPG slots in the way that Freeview does; another is to take revenue share on advertising from the channels they carry. Or they are likely to start suffering soon from what I call the Comcast syndrome - i.e. the inability to grow rapidly due to market saturation and regulatory control. Maybe Sky should employ Michael Grade's lobbying team who were so effective with OFCOM.

1 comment:

ian said...

I think you're wrong about football fans. Most football fans I speak to were much happier with the situation of paying 50 quid to sky each month, to get all the football they could ever want, as opposed to the EU mandated "competition" that introduced Setanta to the mix, and means that if we want to see our team as much as possible, then as well as paying 50 quid to sky, we have to pay another tenner to Setanta. The whole idea of competition is flawed - it seems to be based on the idea that if people can't watch Arsenal, then they'd be just as happy to watch Spurs. And that's just not true.