Premier deal to lift BSkyB rates
Football sees the bigger picture - at a price for viewers
Sunday 09 June 1996
The price rise, the industry believes, will be needed to offset programming costs, which will spiral from around pounds 400m this year to more than pounds 600m in 1998, the first full year of the new deal.
Unfortunately for BSkyB, its desire to put parts of its sports coverage on a pay-per-view basis were put on hold by the Premier League in last week's deal, which saw off competition from United News & Media and a Carlton/Mirror Group consortium.
Pay-per-view will not be considered again until two years into the contract, or the 1998-99 season, a Premier League spokesman said.
The stakes for BSkyB are high. Until now it has built a successful market largely via sport. As of March, it had over 5 million subscribers, one in five of British households, with pounds 950m of turnover predicted this year. That has spurred the shares to reach new heights, valuing the company at pounds 7.5bn and earning managing director Sam Chisholm pounds 4.7m last year.
To maintain profits without increasing prices, BSkyB would have to add another million subscribers, according to analysts, and keep its current mix of highly profitable satellite-based subscriptions, 80 per cent of the total. Most growth to come will be from cable, however, meaning even more subscriptions will be needed just to stand still.
More likely, it will seek to squeeze more revenue from its existing base, which has proven surprisingly resilient with price rises in the past.
Without pay-per-view, BSkyB will not be able to charge large premiums for a top game like Manchester United-Liverpool, to ease the burden.
Its first foray, the pay-per-view fight between Frank Bruno and Mike Tyson generated an average pounds 5 an hour per subscriber - triple the level under monthly subscriptions
In a way BSkyB has been trapped by its own success, needing to keep the Premier League to retain its customer base, yet at the same time outbidding copycats. Last week, it had to trump a bid of pounds 1.5bn over 10 years from United's Lord Hollick .
Doubts are also rife over whether it can add many more subscribers using football, especially since the BBC will retain rights to show highlights on Match of the Day.
"The only way they could grow their business was to get exclusive rights, and that wasn't possible in the current political climate," said a source from one media rival.
However, analyst Dennis Exton of Nikko Europe believes it would be foolish to write its chances off. "They must have been damn confident to bid this sort of money," he says, "and they've proven that they can pull rabbits out of hats in the past."
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