Telewest talks with BSkyB undermine Hollywood deals

Telewest Communications, which is leading the cable industry's negotiations for pay-per-view movie rights with Hollywood studios, has held talks about taking rival film services from BSkyB. Cathy Newman reports that the move undermines the cable industry's attempts to break BSkyB's monopoly on programming.

Telewest's overtures to BSkyB have been made despite the company's involvement with On Demand Management, a consortium negotiating deals with Hollywood studios. The consortium comprises Telewest, NTL, General Cable and Diamond Cable Communications.

Although On Demand has already signed deals with Warner Brothers and Columbia Tristar, City analysts say the chances of the cable companies' pay-per-view scheme taking off have been irrevocably damaged by Cable & Wireless Communications' decision to break away from the rest of the industry and take BSkyB's pay-per-view offering. C&WC is expected to agree terms within a week.

Stephen Davidson, chief executive of Telewest, confirmed last night that talks with BSkyB on pay-per-view had taken place but had failed to reach a conclusion.

He said: "We have spoken in the past on and off at length about taking BSkyB's pay-per-view services. But in the past few months, we've had no discussions about this.

"We're absolutely committed to launching our own pay-per-view service. The board is right behind us on this."

However, another cable industry source said BSkyB was determined to persuade other cable operators to take its films service: "BSkyB goes after everybody. It's a divide and conquer issue."

BSkyB sources said that other cable operators involved in On Demand, such as NTL, had also had talks about taking BSkyB's service. However, NTL denied this suggestion last night. Steven Wagner, group managing director of NTL, said: "We've had absolutely no discussions with BSkyB over taking their pay-per-view service. We have our own viable pay-per- view platform." NTL is in merger talks with Telewest, although the discussions are said to be proceeding slowly.

BSkyB has secured deals with several Hollywood studios. Apart from Universal Studios, Warner Brothers and Columbia Tristar, the studios are thought to be in favour of agreeing exclusive terms with BSkyB.

On Demand is adamant that rights from three studios would be sufficient to set up a competitive alternative to BSkyB's pay-per-view offering.

When news of the Warner and Columbia deals broke, analysts were encouraged that the cable industry had started to challenge BSkyB's programming monopoly by buying its own Hollywood rights, which BSkyB had originally aimed to secure on an exclusive basis.

However, the exposure of cracks in the On Demand alliance will add to scepticism about whether the cable industry's own service will take off.

Until now, pay-per-view events, where customers pay to view a specific film or sporting fixture, have been negotiated solely by BSkyB and have mainly been confined to boxing events. But digital television will enable cable and satellite companies to offer near-video-on-demand.