Sky aims for stake in BBC pay-TV

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The Independent Online
BSkyB, Rupert Murdoch's satellite giant, is gunning for an equity stake in the proposed pounds 200m Flextech-BBC pay-TV joint venture, sources said last night.

It is understood that BSkyB will seek a significant share in the planned eight channels, in exchange for agreeing to offer them to its 3.8 million direct-to-home satellite subscribers.

If its intentions are spurned, BSkyB could elect to develop competing channels in advance of the Flextech-BBC launch, particularly arts and documentaries, as a spoiling tactic. At least two independent documentary film companies have been approached by BSkyB to discuss developing a new channel.

The BBC has said it was against inviting BSkyB to participate in the pay-TV venture, which would see up to eight new BBC-branded pay-TV channels introduced by next summer. But Flextech, owned 51 per cent by John Malone's TCI, is believed to be more flexible. A source said last night: We never rule anything out."

The threat of introducing competing channels was rejected last night as a negotiating tactic by the Flextech source. "It's the kind of thing any of us might do, but it doesn't make sense. BSkyB has the chance to carry the new channels without taking any of the [financial] risk, and we are sure they will see it that way."

BSkyB, which is the leading pay-TV player in the UK, has sought equity stakes in many of the channels it has offered through its multichannel package. It has a 50 per cent share of Nickelodeon, the children's channel, as well as stakes in Playboy, QVC and Paramount. It is also a 40 per cent shareholder in Granada Sky Broadcasting, which launches seven new pay- TV services today.

BSkyB had been competing against Flextech for the right to develop the BBC channels, which pay-TV operators see as potentially highly lucrative.

Meanwhile, it emerged yesterday that a crucial side deal by Flextech, to consolidate its holdings in UK Gold and UK Living, was still "a long way" from being completed.

The deal, which would see Pearson and Cox Communications of Atlanta sell their minority stakes in the channels in exchange for non-voting shares in Flextech, must be completed before Flextech's proposed joint venture agreement with the BBC can go ahead.

This is because UK Gold currently holds the exclusive pay-TV rights to BBC library programming.