Sky plc

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Not to be confused with Sky Television (New Zealand).
Sky plc
Type Public limited company
Traded as LSESKY
Industry Mass media
Predecessors BSkyB
Sky Television
British Satellite Broadcasting
Founded November 1990
Founders Rupert Murdoch
Headquarters Osterley, London, United Kingdom
Area served United Kingdom, Ireland, Germany, Austria, Italy
Key people Nicholas Ferguson (Chairman)
Jeremy Darroch (CEO)
Products Direct-broadcast satellite, Pay television, broadcasting, broadband and telephony services,
Revenue Increase £7.632 billion (2013/14)[1]
Operating income Decrease £1.161 billion (2013/14)[1]
Net income Decrease £0.938 billion (2013/14)[1]
Owners 21st Century Fox (39.14%)
Employees 31,000 (2013/14)[2]
Subsidiaries BSkyB
Sky Ireland
Sky Deutschland (89.71%)
Sky Italia
Amstrad
Website corporate.sky.com

Sky plc is a British-based pan-European satellite broadcasting, on-demand Internet streaming media, broadband and telephone services company headquartered in London, with operations in the United Kingdom, Ireland, Germany, Austria and Italy. Sky is the largest pay-TV broadcaster in Europe with over 20 million subscribers.[2][3]

Formed in November 1990 by the equal merger of Sky Television and British Satellite Broadcasting, BSkyB became the UK's largest digital subscription television company. On 13 November 2014, BSkyB announced that, after completing the acquisition of Sky Italia and a majority 89.71% interest in Sky Deutschland, its holding company British Sky Broadcasting Group plc would change its name to Sky plc, subject to shareholder approval.[4]

Sky is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately £13.69 billion (€16 billion) as of 14 August 2014 on the London Stock Exchange.[5] 21st Century Fox owns a 39.14 per cent controlling stake in the company.[6]

History[edit]

Foundation[edit]

British Sky Broadcasting was formed by the merger of Sky Television and British Satellite Broadcasting on 2 November 1990.[7] Both companies had begun to struggle financially and were both suffering financial losses as both competed against each other for viewers. The Guardian later characterized the merger as 'effectively a takeover by News Corporation'.[8]

The merger was investigated by Office of Fair Trading[9] and was cleared a month later since many of the represented views were more concerned about contractual arrangements which had nothing to do with competition.[10] The Independent Broadcasting Authority was not consulted about the deal; after approval, the IBA demanded precise details about the merger, stated they were considering the repercussions of the deal to ultimately determine whether BSB contracts were null and void.[11][12] On 17 November, the IBA decided to terminate BSB's contract, but not immediately, as it was deemed unfair to 120,000 viewers who had bought BSB devices.[13]

Sam Chisholm was appointed CEO [14] in a bid to reorganize the new company, which, continued to make losses of £10 million per week. The defunct BSB's HQ, Marco Polo House were sold off, 39% of the new company's employees were made redundant to leave just under 1000 employees,[8] many of the new senior BSkyB executive roles were given to Sky personnel with many BSB leaving the company. In April the nine Sky/BSB channels had been condensed into five, with EuroSport being dropped soon after the Sky Sports launch.[15] Chisholm also renegotiated the merged company's expensive deals with the Hollywood studios, slashing the minimum guaranteed payments. The defunct Marcopolo I satellite was sold off in December 1993 to Sweden's NSAB, and Marcopolo II went to Norway's Telenor in July 1992[16] after the ITC was unable to find new companies to take over the BSB licences and compete with BSkyB. News International received 50%, Pearson PLC 17.5%, Chargeurs 17.5%, Granada 12%, Reed International 2% of the new shares in the company.[17]

By September 1991, the weekly losses had been reduced to £1.5M a week, Rupert Murdoch said "there were strong financial marketing and political reason[s] for making the compromise merger instead of letting BSB die. Many of the lessons had been learnt with more than half the running cost of the combined company" Further cuts in losses were a direct result of 313,000 new customers joining during the first half of 1991.[18] By March 1992, BSkyB posted its first operating profits, of £100,000 per week, with £3.8 million weekly from subscriptions and £1 million from advertising, but continued to be burdened with £1.28 billion of debt. James Capel forecast BSkyB would still be indebted in 2000.[19]

Premiership football[edit]

Main article: Sky Sports

In the autumn of 1991, talks were held for the broadcast rights for Premier League for a five-year period, from the 1992 season.[20] ITV were the current rights holders, and fought hard to retain the new rights. ITV had increased its offer from £18m to £34m per year to keep control of the rights.[21] BSkyB joined forces with the BBC[22] to make a counter bid. The BBC was given the highlights of most of the matches, while BSkyB paying £304m for the Premier League rights, with give them a monopoly of all live matches, up to 60 per year from the 1992 season. [23] Murdoch has described sport as a "battering ram" for pay-television, providing a strong customer base.[24] A few weeks after the deal, ITV went to the High court to get an injunction as it believe their details were leaked before the decision was taken. ITV also asked the Office of Fair Trading to also investigate since it believed Rupert Murdoch's media empire via the newspapers had influence the deal.[25] A few days later neither action took effect, ITV believed BSkyB was telephoned and informed of its £262m bid, and Premier League advised BSkyB to increase its counter bid.[26]

BSkyB retained the rights paying £670m 1997–2001 deal, but was challenged by On Digital[27] for the rights from 2001–2004, thus were forced to £1.1 billion which give them 66 live games a year.[28]

Following a lengthy legal battle with the European Commission, which deemed the exclusivity of the rights to be against the interests of competition and the consumer, BSkyB's monopoly came to an end from the 2007–08 season. In May 2006, the Irish broadcaster Setanta Sports was awarded two of the six Premiership packages that the English FA offered to broadcasters. Sky picked up the remaining four for £1.3bn.[29]

Floatation[edit]

In October 1994,[30] BSkyB announced its plans to float the company on the UK and US stock exchanges, selling off 20% of the company.[31] The stock flotation reduced Murdoch's holding to 40 percent and raised £900m, which allowed the company to cut its debt in half. Sam Chisholm said "By any standards this is an excellent result, in every area of the company has performed strongly".[32] Chisholm, become one of the world's most highly paid television executives.[33]

In 1995, BSkyB opened its second customer management centre at Dunfermline, Scotland,[34] in addition to its original centre at Livingston which opened in 1989. BSkyB entered the FTSE 100 index, operation profits increased to £155M a year, and Pearson sold off its 17.5% stake in the company.[35]

Sam Chisholm resigned from BSkyB due to a rift with Rupert Murdoch.[36] A week later, Murdoch was quoted as saying "I cannot understand the fuss; BSkyB was grossly overpriced", which caused further rifts with the new management.[37]

Launch of Sky Digital[edit]

In 1997, BSkyB formed a partnership with Carlton and Granada to bid for the right for the new digital terrestrial network. In June, it was awarded the right to start the service, ONdigital under the condition BSkyB withdrew from the group's bid.[38] A few days afterwards BSkyB left the consortium, and work fully concentrated on its digital satellite network.

In February 2003 BSkyB wished to renegotiate its deal with MTV to reduce its payment from £20m. Chief executive Tony Ball said "We're definitely prepared to stare them down if we can't get a sensible deal, MTV, and other channels, have done particularly well out of the growth of Sky but the opportunity for savings is now there and Sky will be taking it," he added. "MTV has done extremely well out of that original deal."[39] On 17 April 2003 BSkyB launched its own range of music channels Scuzz and Flaunt with The Vault being added in Summer 2003, as part of its plan to create its own original channels for the platform.[40] Within 18 months the channels failed to make impact, and were outsourced to the Chart Show Channels company.[41]

Shortly afterwards it acquired art world, giving a majority of subscribers full access to the channel. The buyout was part of James Murdoch's strategy to improve the perceptions BSkyB which could lead to potential new subscribers. John Cassy, the channel manager of Artsworld, said: "It is great news for the arts that a dedicated cultural channel will be available to millions of households."[42]

In early 2007 Freeview overtook Sky Digital with nearly 200,000 more subscribers at the end of 2006, while cable broadcaster Virgin Media had three million customers.[43]

Virgin Media Television acquisition[edit]

On 4 June 2010, BSkyB and Virgin Media announced that they had reached agreement for the acquisition by Sky of Virgin Media Television.[44][45]

Virgin1 was also a part of the deal and was rebranded as Channel One on 3 September 2010, as the Virgin name was not licensed to Sky.[46][47] The new carriage deals are understood to be for up to nine years.[48]

On 29 June 2010, The Competition Authority in Ireland cleared the proposed transaction.[49]

On 20 July 2010, The Office of Fair Trading announced that they would review BSkyB's acquisition of the Virgin Media Television business to judge whether it posed any competition concerns in the UK.[50] The OFT planned to investigate the deal to see whether it could constitute a qualifying merger under the Enterprise Act 2002. The watchdog invited interested parties from the industry to comment on the sale, including its potential impact on the pay-TV market. On 14 September 2010, the OFT decided not to refer BSkyB's takeover of Virgin Media's TV channels to the Competition Commission.[51]

Attempted takeover by News Corporation[edit]

In June 2010, News Corporation made a bid for complete ownership of BSkyB. However, following the News International phone hacking scandal, critics and politicians began to question the appropriateness of the proposed takeover. The resulting reaction forced News Corp. to withdraw its bid for the company in July 2011.[52]

On 13 July 2012, News Corporation dropped its bid for 100% of BSkyB in the light of the News of the World phone hacking scandal.[53]

In September 2012, United Kingdom broadcasting regulator Ofcom ruled that BSkyB could stay on air — and it criticised former chairman Murdoch's handling of the News International phone hacking scandal.[54] ‘As a company, we are committed to high standards of governance and we take our regulatory obligations extremely seriously,’ BSkyB replied in a media release.[55]

Following News Corporation's split into two on 28 June 2013 to create two separate companies, 21st Century Fox (the re-branded News Corporation), and the spin-off company New News Corp, the 39.14% stake held by News Corporation in BSkyB was retained by the re-branded 21st Century Fox.

European acquisitions[edit]

On 12 May 2014, BSkyB confirmed that it was in talks with its largest shareholder, 21st Century Fox, about acquiring 21st Century Fox's 57.4% stake in Sky Deutschland and its 100% stake in Sky Italia. The enlarged company (dubbed "Sky Europe"in the media) will consolidate 21st Century Fox's European digital TV assets into one company.[56][57] The £4.9 billion takeover deal was formally announced on 25 July, where BSkyB would acquire 21st Century Fox's stakes in Sky Deutschland and Sky Italia. BSkyB also made a required takeover offer to Sky Deutschland's minority shareholders.[58] The acquisitions were completed on 13 November.[4] British Sky Broadcasting Group plc subsequently changed its name to Sky plc. However, the United Kingdom operations are still run under the company name British Sky Broadcasting Limited.

Management[edit]

The first CEO of BSkyB was Sam Chisholm, who was CEO of Sky TV before the merger. Chisholm served in this position until 1997. He was followed by Mark Booth who was credited with leading the company through the introduction of Sky. Tony Ball was appointed in 1999 and completed the company's analogue to digital conversion. He is also credited with returning the company to profit and bringing subscriber numbers to new heights. In 2003, Ball announced his resignation and James Murdoch, son of Rupert Murdoch was announced as his successor. This appointment caused allegations of nepotism from shareholders.[59]

On 7 December 2007, it was announced that Rupert Murdoch would be stepping down as BSkyB's non-executive chairman and would be replaced by his son, James. In turn, James stepped down as CEO of BSkyB, to be replaced by Jeremy Darroch.[60]

Financial performance[edit]

Financial results have been as follows:[1]