BSkyB lines up video on demand

BskyB is eyeing a £1bn move into video-on-demand, the new technology that allows viewers to retrieve archive TV programmes down their telephone lines.

BskyB is eyeing a £1bn move into video-on-demand, the new technology that allows viewers to retrieve archive TV programmes down their telephone lines.

The satellite TV giant, which is 40 per cent-owned by Rupert Murdoch's News Corporation, has made approaches to both Video Networks, which is rolling out its video on demand service in London, and the smaller FilmGroup, which pulled a £250m float last month.

BSkyB is understood to have offered Simon Hockhauser, the founder and chief executive of Video Networks, around £80 a share for his unquoted company.

This price would value the business at nearly £1bn, and compares with around £40 a share at which the most recent fund-raising for video Networks was struck. That deal brought on board a leading US investor, who is understood to be close to Bill Gates, the founder of Microsoft.

Such a deal would make millionaires out of most of the staff at Video Networks, who either hold shares or share options, some priced at as little as £2.50 a share. Mr Hochhauser's stake would be worth close to £100m.

FilmGroup, which was set up by 29-year-old former investment banker Simon Franks, was last month forced to pull a planned £250m flotation as the stock market sudden rejected technology stocks.

However, the company, which has built up an enormous library of video on demand film rights, is understood to have attracted a number of suitors other than BSkyB, notably United News & Media and NTL.

Both Film Group and Video Networks are exploiting the new broadband phone technology called either ADSL or DSL, depending on the phone company providing it. This allows large amounts of data to be transmitted very quickly, with both high-speed internet access or TV programmes being sent down conventional copper wire phone lines.

BSkyB is interested in this technology as an add-on to its digital satellite TV service. It has a target of signing up 5 million subscribers to its digital service by the end of this year.

This week it hopes to be able to announce it is well on the way to that target when it releases full-year figures. These are expected to show losses increasing to around £150m.