BSkyB interactive hit hard as two big retailers check out

BSkyB has suffered a body blow to its £1.9bn interactive business after two of the most successful retailers on its digital shopping operation pulled out.

Woolworth and Argos will cease selling through the Sky Digital service by the end of this month. They were original retailers to sign up to the service, and were among the most successful.

Argos, which is part of GUS, is understood to be reviewing its approach to selling through interactive services and at Woolworth, the move is a simple case of cutting costs. The retailer, chaired by Gerald Corbett, demerged from Kingfisher and considered the Sky service too expensive. "We have decided to concentrate our effort on selling through the internet, although the Sky platform has some attractions," said a spokeswoman. "We will keep our mind open and we could return."

No one was available for comment at BSkyB, but the defections will be a blow to the attempts by Tony Ball, the group's chief executive, to bring the interactive business into profit.

The venture, called British Interactive Broadcasting and originally marketed under the brand, Open, was initially a joint venture with BT, HSBC and Matsushita.

BSkyB has gradually bought out its partners to get to grips with losses that were running at more than £200m a year. In the final deal, BT sold its 19.9 per cent stake for £385m, valuing the business at £1.9bn.

BSkyB also paid more than £250m for the betting business, Sports Internet, which is now believed to be worth a fraction of that. Analysts believe BSkyB has as much as £3bn of investments in internet or interactive businesses which are now worth far less than BSkyB paid for them.