Playboy Channel costs keep Flextech in the red

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Flextech, the pay-television programme packager, continued to post losses in the first half of 1996, due to high start-up costs at the Playboy Channel and a disappointing performance at European Business News, which it jointly owns with Dow Jones, the financial publisher.

Although it has never made a profit, Flextech is the second force in the UK pay-television market, owning or managing 13 different channels ranging from UK Gold, UK Living, Bravo, EBN, and the Children's Channel to Playboy and Sega, the games channel.

Total turnover increased by 63 per cent in the half to pounds 24.8m, but pre- tax losses rose marginally to pounds 7.8m from pounds 7.6m. The company blamed the start-up costs at Playboy, which launched in the autumn of last year. Subscription revenues overall climbed 47 per cent year on year, to pounds 13.7m.

Roger Luard, the company's chief executive, defended the company's growth record. "If we stopped moving, we would move into profit pretty quickly" he said. "But I don't think our shareholders would approve if we did not take the opportunities to expand when they arise."

Flextech, well known for its deal-making strategy, holds 20 per cent of Scottish Television and provides eight channels to the multi-channel package of BSkyB, Rupert Murdoch's pay-television giant. It is owned 51 per cent by TCI International, part of John Malone's media group.

"We follow Malone's example," Mr Luard said. "Rewarding shareholders with share price growth is a way of maximising value."

Flextech confirmed this week that it is in talks with the BBC about jointly developing new pay-television channels using BBC programming. Similar talks are being held between the BBC and BSkyB. Mr Luard declined to comment but conceded the BBC brand was strong, and would find a market in the multi-channel environment.

He cautioned, however, that "all our research shows that people watch programmes, not channels", and that any new programming would have to be of sufficient quality to attract and retain viewers.

The cable and satellite industry is going through a shake-up, as operators attempt to maximise viewership. Mr Luard declined to say whether any specific services would be dropped.