Media: Pie in the sky that people will pay for: Rupert Murdoch's no-frills centre in Scotland is transforming the way that the British view television. Maggie Brown paid a visit

TO UNDERSTAND how rapidly and dramatically Rupert Murdoch is changing British television you need only look at what he is doing in Livingston, Scotland, where BSkyB has its subscription television centre.

Here, in a nondescript industrial building, Mr Murdoch is in the process of transforming Britain, where people have long taken low-cost viewing for granted, into a nation that expects to pay for the privilege of watching something good on television.

The Livingston centre holds the key to BSkyB's future profits. It is here that 70 per cent of company revenue - earned from regular monthly subscriptions paid voluntarily by 1.2 million BSkyB viewers, who buy its non-stop film services - is processed.

It also shows how BSkyB is transforming British television into a venture resembling book, magazine or video publishing. Satellite can offer a wide range of special-interest channels, which do not necessarily have to be paid for by the indirect route of advertising, or an enforced BBC licence fee.

This is the multi-channel dream in which the consumer - if he or she can pay - calls the shots. It so captured the imagination of the 1986 Peacock Committee - set up by the Home Office to study alternative ways to fund the BBC - that it became, and remains, a firm part of official government policy.

Since Sky was launched in February 1989, Mr Murdoch has proved that enough Britons will pay directly for television, if they want the service badly enough, to sustain a business. Subscribers pay pounds 16.99 a month, or pounds 203 a year, for two film channels - the Movie Channel and Sky Movies Plus - and Mr Murdoch is gambling that they will also pay for top-class sport.

When Rick Parry, chief executive of the Premier League, was flown to Livingston in May he saw how pay television could offer football not only airtime but a major infusion of cash: a week later top clubs struck the controversial pounds 304m deal switching live first- class football to Sky from ITV. This deal is now seen as the take-off point both for an acceleration in dish sales and for mass-market subscription television. Zenith Media now predicts 25 per cent of homes, or 5.7 million, will receive satellite by the end of 1993, compared with the 3.5 million now. It is accepted by both the BBC and Independent Television Commission that satellite has taken off faster than expected.

Livingston was set up in autumn 1989 by 30 staff in the days when Sky was selling satellite equipment direct to wipe out its rival, British Satellite Broadcasting. Some 400 people now work there, for an average pounds 8,000 a year. They are housed in a converted factory put up by the local development corporation. There are no frills, and a minimum of paperwork.

Staff deal with 50,000 phone calls and letters each week, handling requests from new dish owners for the BSkyB film channels: these are switched on, over the air (see box) within seconds. The centre is open from 8.30am to 10pm, seven days a week, 365 days a year. BSkyB viewers are also taking advantage of a special offer to subscribe to Sky Sports, a channel which switches from being a free to a pay service on 2 September: if viewers subscribe before 1 August there is a special rate of pounds 2.99 a month, or pounds 29.99 for a year; the charge rises to pounds 5.99 a month, thereafter. The weekly football starts on Sunday, 16 August. BSkyB will not say how many have signed up so far, but it plans an advertising blitz, to be screened on ITV.

In the main building, operators are kept abreast of daily achievements by a huge scoreboard: by 3pm there have been 2,333 calls about the special sports channel offer. The overall impression is of a slick, professional, no-nonsense organisation. In a converted loading bay eight telephone operators spend the afternoon being schooled in the art of deftly handling angry callers, who are bound to call up once the sports channel is scrambled; they are to be excluded if they cannot or will not pay.

Livingston is unique. Nowhere else in the world can the mechanics of subscription satellite television can be studied: with 1.2 million subscribers (who pay for the two film channels) out of BSkyB's total 3.5 million (cable and satellite) homes, Britain leads the way in sheer size. David Wheeler, the centre's general manager is indundated with requests to visit, especially from the Far East.

Just up the road from the subscriptions centre Mr Wheeler ushers me into an even larger building, which has been acquired by the expansive BSkyB. A further 200 people are being recruited to handle growing business. In the computer room a brand new mainframe Fujitsu computer is being installed: it will handle the next ambitious phase of development - pay-per-view. This will offer subscribers the choice of paying extra for a 'viewing ticket' to watch a world- class event at home.

Gary Davey, BSkyB's managing director, based at its west London television centre at Osterley, says the company will start experimenting with pay-per-view next year. It will use an existing computerised voice recognition system, because of the problem of dealing with a huge number of calls in a very short space of time. The big events to be test-marketed are world-title boxing fights or big concerts. The system will be used to work out how to market the big football matches as pay-per-view. 'Like most things we do at Sky, we have no history to draw on. We need a certain number of people to make pay-per- view worthwhile. The question is the critical mass,' says Mr Davey. 'The other great mystery is: what will the public pay?'

None the less, the way the football deal could raise extra revenue is simple. If BSkyB charged pounds 2 per match, and 500,000 homes subscribed, it would raise pounds 1m. With 60 matches a year this would be pounds 60m, on top of the pounds 5.99 monthly rate. BSkyB can also share the proceeds with the owners of the events, reducing the price of rights to screen them.

There are still many homes BSkyB wants to convert to subscription services. It also plans to upgrade and relaunch Sky One, its free entertainment channel, this autumn. The income from subscription helps to fill the time-lag in advertising, which has been slower to build up, and which accounts for 30 per cent of income

Edward Simons, who with Harvey Goldsmith owns Allied Entertainment - the company that covered Carmen live for BSkyB and specialises in big events such as Live Aid - says BSkyB will be the first port of call when it does future deals. 'No question,' he says. 'There is now a third force in broadcasting.'

Because of the technical know-how gained at Livingston, BSkyB also has a pivotal role in controlling the expansion of pay-per-view in Britain. The company worked with partners to devise videocrypt, the scrambling device that ensures only those who pay up can receive the scrambled system: adopted by the BBC for its night-time specialist services, it looks set to become a British industry standard.

Livingston is also poised to act as the gateway for other satellite subscription services. For example, BSkyB, which currently operates six of the 20 or so channels that can be received via the Astra satellite, has just started handling, for a fee, subscriptions for TV Asia, a specialist day-time satellite service showing programmes from the Indian subcontintent. BSkyB has recruited Urdu and Hindi speakers.

Mr Davey says this is only a start: it is in negotiations with other would-be pay television service companies. But will it agree to handle business for its direct rivals? Other potential pay operators are privately worried that BSkyB's major push into sports will exhaust the subscription market and leave them reliant on increasingly fickle, recession- hit, advertising revenue.

How subscription works

ANY high-street satellite supplier can provide you with a starter 'smart card' to give you temporary access to pay channels. This credit card-style device, with a microchip on one side, slips into the combined satellite receiver and decoder box that sits on the top of your television set and is connected to the satellite dish outside.

Once this is installed, you telephone BSkyB's subscription centre at Livingston, in Scotland. You talk to one of the operators (above), who is able to switch on the encrypted (scrambled signal) services - the Movie Channel and Sky Movies Plus - within seconds of your call by sending a signal via the central computer to the satellite. Livingston then sends you a personal 'smart card' with your BSkyB number engraved on it.

This card, inserted into the receiver/decoder, descrambles the signal. It costs pounds 16.99 a month for two film channels, with the Comedy Channel

(Photograph omitted)

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