That's entertainment, now on Sky 2

Another day, another Sky channel ... this time BSkyB hopes to offer more choice for the family and compete head-on with the big broadcasters. By Mathew Horsman and Meg Carter

Some call it the silly season. Not so Britain's broadcasters, for whom summer does not mean long, lazy hols in Tuscany but frantic activity at home - finalising autumn schedules, setting promotional campaigns and, increasingly, announcing new channel launches.

This year is no exception. The cable industry is due to launch niche channels this autumn, while BSkyB, the pay-TV giant, has confirmed plans to launch 11 extra satellite services - underpinned, as ever, by a further price rise for its multi-channel package.

The unveiling last week, at a swank London hotel, of a new Sky service, Sky 2, was the third in a series of programme announcements by leading broadcasters. Both the BBC and ITV have announced their autumn schedules, while Channel 4 will make its presentation in September.

The Sky show is, of course, a little different. Unlike the BBC, which relies on the licence fee for its funding, or ITV and Channel 4, both supported by advertisers, BSkyB, 40 per cent owned by the media mogul Rupert Murdoch, charges subscription fees - enough, indeed, to bring in pounds 700,000 a day in lovely profits.

It is what Sam Chisholm, chief executive of BSkyB, calls "the virtuous circle": more programming, higher charges, more money for programming, higher fees. Subscribers, who will now have to cough up pounds 26.99 a month, a rise of pounds 3, for the privilege of watching the film, sport, news and general entertainment channels that make up the Sky package, may disagree.

"Sky launches new channels most days of the year, several hours a day, it now seems," David Elstein, Sky Television's head of programming, said last week. Elstein, speaking at the launch of Sky 2, Sky's second entertainment channel, was not joking. As well as seven services to be launched in partnership with Granada, there will be a third Sky Sports service, the second Sky entertainment channel, a Warner Brothers Channel and the Weather Channel, which will be available via satellite for the first time.

Sky 2 has a particular strategic importance, Elstein maintains. "It is a very important launch for us, enabling us greater scheduling flexibility to offer viewers more choice - replicating in entertainment what we have already achieved in our movie offerings and sport." And the ultimate aim? "To boost the family and, in particular, female audience."

What he doesn't say, but what Sky watchers have long predicted, is that BSkyB wants to vie with the mainstream commercial broadcasters for the general entertainment viewer. With satellite and cable now delivering subscription programming to 25 per cent of all TV homes, the prospect of competing with the likes of Channel 4, the new Channel 5, maybe even one day BBC 1 and ITV, no longer looks like the joke it once was.

BSkyB is able to launch these new channels after a reshuffle of services using the Astra satellite, and following recent changes in the Scandinavian TV market, which freed sufficient capacity to launch Sky 2. The new channel starts on 1 September and will broadcast each day between 7pm and 6am.

Elstein aims to move certain Sky 1 favourites on to the new channel - Melrose Place, The Late Show with David Letterman and The X Files, for example. New drama will mostly be acquired from abroad - particularly from the United States and Australia. Highlights include TekWar, a futuristic saga based on the novels of Captain Kirk's alter ego, William Shatner; Kindred: The Embraced, a contemporary vampires drama from Melrose Place's creator, Aaron Spelling; the Australian police action series Water Rats, and Profit, a drama set in the world of corporate politics.

Repeats (or in preferred parlance "alternative viewing opportunities") will be used "judiciously", he says. "Sky 2 will allow certain programmes to be scheduled at more convenient hours, now that Sky entertainment has two peak-time schedules at its disposal." Such as The Late Show with David Letterman, which currently goes out after midnight on Sky 1.

The new channel will allow Sky to increase the amount of commercially lucrative peak-time airtime it can sell to advertisers. The move doubles the amount of peak time available.

"To begin with, Sky 2 drama will be heavily dependent on acquisitions - as Sky 1 was three to four years ago," Elstein adds. "But Sky 1 is now 35 per cent to 40 per cent UK-produced, and I expect Sky 2 to achieve the same over a similar period."

Broadening the range of programmes on offer to the general audience is now imperative, he adds. "Although sport is, perhaps, the most important part of Sky's programming, entertainment is the most popular."

BSkyB's approach to Sky 1 and 2 will not be like the BBC's to its two terrestrial channels. "I don't intend one to be majority interest, the other minority," he explains. "To begin with, Sky 2 will probably be edgier, but our aim is to move people from one to the other - and back again."

Women are a key audience Sky must build, he explains: "Entertainment services are especially popular. The success of UK Living has undoubtedly been an influence. Which is why we are diverting money away from kids' programming on Sky 1 (an area already well-served) and into daytime women. We will shortly be launching a new women's magazine show, One to Three."

Despite suggestions that the cable and satellite children's TV market has neared saturation, Elstein hints that yet another service is likely to launch before the end of the year. Fox Children's Network has been in talks with both Sky and Flextech - which owns the children's service TCC in the UK - to discuss moving in to this country. "I would be very surprised if they didn't launch this year," he says.

Sky Sports 3 details will be unveiled "in two weeks' time". The channel launches on 16 August, broadcasting the Nationwide Football League, Coca- Cola Cup and US PGA Golf.

Expect, too, further pay-per-view "tests" from the autumn, akin to the controversial Bruno-Tyson match earlier this year. Elstein refuses to be drawn on details of these.

Industry sources suggest that the new Warner Channel will feature evening pay-per-view films. There is even the prospect of additional satellite capacity on Astra, to allow even more experimentation with PPV formats. Elstein won't be drawn at this stage, however. "We hope to be able to offer some more but are still at the talking stage," he says.

Why all this attention to analogue satellite capacity when BSkyB intends to launch a spanking new digital service in the autumn of next year? Elstein swears it makes sense, with one year to go in the run-up to digital broadcasting, to "test out systems in a number of different ways".

Industry observers are more wary, believing that Sky is intent on holding on to its near-monopoly in pay-TV as long as possible before committing to the pounds 200m or so it might cost to go digital. That view was strengthened last month, when the Office of Fair Trading gave BSkyB a near clean bill of health (some called it a whitewash) over allegations that it was abusing its dominant position in pay television. It appears that little can stop Mr Murdoch now.