When John Birt, the director general of the BBC, gave the keynote
lecture at this year’s Edinburgh Television Festival, he described in
dramatic terms, the way in which ‘BSkyB now stands poised to become the
dominant financial force in our industry by the turn of the decade’.
This view has been underlined with a vengeance in the last few days by
the stock market’s belief that the upstart company, which only moved
into profit four years ago, could undoubtedly muster the financial
firepower, should it desire, to mount a takeover bid for blue-blooded
and sluggish Pearson.
What needs to be spelled out is the form BSkyB’s future dominance will
take. Most reporting of BSkyB centres on issues such as sporting rights
and new channels. Sky’s key sports contracts do provide the ‘battering
ram’, as Murdoch himself put it last week, for driving into the global
subscription market. BSkyB’s switch to escalating profits was directly
related to its Premier League deal in 1992, and the immediate success of
the sports pay channel. The subsequent dramatic profit growth fuelled
its flotation and rapid share price rise: its stock market value is now
double that of Pearson.
But what few people outside of the 4,000 who work for BSkyB realise is
that programming is only one plank in its development. It is poised to
sanction the manufacture of the new customised digital satellite
decoders - the black box which will sit on top of TV sets and allow
access to hundreds of channels.
These are in a different league to current decoders as, for the first
time the sets will contain a modem and a return data channel for
interactive communication. They will allow the householder and BSkyB’s
subscription management centres the means to conduct a huge variety of
secure transactions instantly, such as pay-per-view and home-shopping.
This is why some powerful corporations are preparing to make common
cause with the broadcaster, and quite possibly help subsidise the
decoder, to ease the cost for consumers discarding analogue for digital.
The modem and return channel technology can be used either to distribute
entertainment to TV screens, or business-to-business services on to
personal computers. BSkyB, in other words, is developing into a
formidable direct-to-home marketing machine, and will use its encryption
and subscription management skills in a myriad of new money-making
services. David Elstein, who recently left BSkyB to head up Channel 5
remarked last week that ‘if you think BSkyB is big now, wait for three
Whether or not it swallows any or all of Pearson’s media interests, the
message is clear: of all the UK’s media companies, it is BSkyB which is
brilliantly positioned for the 21st century.