Sky prepares for pay-TV market to be swamped

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The Independent Online
The pounds 1bn pay television market is set for its busiest summer ever, as broadcasters scramble to prepare for the launch of as many as 15 new channels to be beamed into Britain's 5.5 million cable and satellite homes.

Pay-television subscribers will see their choice of channels broaden dramatically in the autumn, when 12 new services are added to the multi- channel package offered by market leader BSkyB, 40 per cent owned by Rupert Murdoch.

The additional channels will make their debut in time for a healthy hike in subscription rates at the highly profitable satellite broadcaster, with the full package of entertainment, films and sport likely to cost an additional pounds 3 a month, or pounds 26.99.

Cable operators, too, are reviewing their schedules for the autumn, and have launched a "summer house cleaning" to prune their systems of under- performing channels to make way for new services.

The two leading operators - Telewest and Nynex Cablecomms - are likely to carry the new Sky offerings as part of their long-term supply contracts with BSkyB. That will require finding capacity on what is a very clogged network. Likely targets for pruning are the foreign language services (including Germany's RTL and France's TV5), as well as BET, the black entertainment television channel, which is shifting to an all-jazz format in a last-ditch effort to avoid being dropped by cable operators.

For those channels that remain, there is a push by leading operators to lower the fees paid per subscriber, and to establish firmer audience targets.

Some industry executives say this summer of negotiations will be the pay-TV sector's most extensive ever, in the lead up to what could be the last season before the introduction of digital services in 1997.

BSkyB has routinely expanded choice each autumn, to help justify subscription increases. Sky's chief executive, Sam Chisholm, calls the strategy the "virtuous circle", whereby higher spending on programming underpins higher fees, allowing Sky to purchase yet more programming.

This autumn, the broadcaster's basic entertainment channel, the flagship Sky One, could be be supplemented by Sky Two, a similar mix of light entertainment. A third sports channel is also under consideration, while Warner, the giant US entertainment company, this week confirmed it would launch its WBTV service in the UK in November as part of the Sky package.

A raft of new programming is also on offer from Granada Sky Broadcasting (GSB), the joint venture between Sky and media and leisure giant Granada, also scheduled for launch in the autumn. They include Granada Plus, a "golden oldies" service featuring repeats of Granada hit programmes such as Coronation Street and a 12 hour-a-day talk format, with hosts like David Frost.

Stuart Prebble, GSB's chief executive, says the talk channel will be a departure from the usual fare. "Most of the talk in the UK is of the Oprah variety - you know, I married my sister by mistake. We intend to talk about the issues of the day - for instance, one day we might be talking about the football match, the next the Manchester bombing."

Rounding out the GSB service will be four strands of programming sharing one channel, focusing on lifestyle issues.

BSkyB is now in talks with several independent channels about offering a place in the multi-package. They include Virgin TV, backed by Richard Branson's Virgin Group; Tara, the Irish channel; the Sega games channel; and the 24-hour Weather Channel.

Many of these are in negotiations with Flextech, the cable and satellite programmer, which some in the industry call "the second force" in pay- TV. Flextech owns or manages channels such as Family, Playboy, UK Gold and UK Living, and provides subscription and advertising services.

That will leave as many as 15 fully developed channels without carriage contracts in the UK, a queue that is likely to grow throughout 1996. The problem lies with the restraints of the analogue transmission system on both cable and satellite. On the satellite side, only BSkyB appears to have much room left, and only because it paid over the odds to secure three additional transponders on the Astra satellite earlier this year.

Sky's stranglehold on available satellite capacity has frustrated programmers for years and the Office of Fair Trading, is to report later this month on its inquiry into BSkyB's dominance in the marketplace.

The limits will be removed, of course, when digital satellite is launched. But many pay-TV executives are betting the digital age will arrive later than the promised date of late 1997. Why jeopardise pounds 1bn worth of revenue a year for the uncertain gains of an expensive transition from analogue?