BSkyB: the hunter becomes the hunted

Ten years ago, in December 1994, BSkyB was floated on the London Stock Exchange.

And so began one of my favourite professional duties, the annual company meeting.

Over the years, the volume of journalists attending the ritual at Westminster’s Queen Elizabeth Hall has grown to a swarm. That’s because Rupert Murdoch likes journalists and sharp questions.

After the meeting, he always holds an impromptu press conference. Murdoch, bless, also has a tendency to leave the prepared script – at a New York conference three weeks ago he suddenly spoke out about the faults of the previous regime.

So, this month’s Sky annual general meeting qualifies as my most disappointing media moment of 2004 by a mile.

Murdoch galloped through the formal proceedings in 40 minutes, then disappeared from the platform like a temperamental diva with a sore throat.

He is clearly rattled by John Malone’s quiet stalking of News Corp votes. But it is also obvious that Sky is at a difficult stage, introducing the gentler but pricier “what do you want to watch?” marketing stance to woo the refuseniks.

I wonder how effective it’s going to be. I can’t say I ever expected a Sky ad campaign to star a historical costume “drama that’s first run”, but there you go! Conceptually for Murdoch, and for those who run the company, this requires a big switch away from being the ultimate challenger brand, to the mature incumbent. Sky’s frontier philosophy, of always having to battle and push forward even as you seek safety in a monopoly, is part of the company’s DNA.

It is now clear that it is being beaten soundly, as its place as the main vehicle of extra choice for UK viewers has been seized from it by Freeview and those £60 plug-in connectors.

Freeview’s ability to add up to perhaps three million homes in the past year, assisted by the BBC’s cartoon promotions, is a storming achievement. (All the odder, of course, is Sky’s semi detached involvement with Freeview).

Whether the momentum is kept up next year so that it matches or even surpasses Sky’s targeted eight million homes is not really the issue. Freeview has already broken the Sky spell.

Further, there is the looming issue of which side will win the free-to-air satellite battle? What we are about to see now is a new phase to mop up the six million UK homes outside of the digital terrestrial network.

As I write, it is not clear whether ITV will make a Freesat platform reality by joining forces with the BBC. But it is abundantly clear that the public service broadcasters, including Channel 4, are being encouraged by Government and Ofcom to band together and offer free-to-air digital services – not the basic E4 type.

Sky is a fantastically successful pay business, with ever improving margins, but the message from the latest first quarter figures is that it is barely growing its network.

It’s having to resort to careful PR, for that net increase of 62,000 is actually the seventh successive decline and shows that net recruitment of new subscribers is running at little more than a third of last year’s level.

The biggest growth is coming from those adopting Sky+ and multi-room packages – no bad thing, they drive up viewing – but this is more a question of keeping customers happy. Sky is paying the price for putting too many eggs into film and sports, not investing more seriously in content and not being more price sensitive.

There’s no reason to panic, but problems of age are catching up with it.

By Maggie Brown

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