Sky Group

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British Sky Broadcasting Group plc
Company typePublic limited company
LSE: BSY
IndustryMass media
PredecessorSky Television
British Satellite Broadcasting
FoundedNovember 1990
FoundersRupert Murdoch
Headquarters
Osterley, London
,
United Kingdom
Area served
United Kingdom and Ireland
Key people
Nicholas Ferguson (Chairman)
Jeremy Darroch (CEO)
ProductsDirect-broadcast satellite, Pay television, broadcasting, broadband and telephony services,
RevenueIncrease £7.235 billion (2012/13)[1]
Increase £1.291 billion (2012/13)[1]
Increase £1.108 billion (2012/13)[1]
Number of employees
24,000 (2012/13)[2]
Parent21st Century Fox (39.14%)
Websitewww.sky.com
corporate.sky.com

British Sky Broadcasting Group plc (commonly known as BSkyB; trading as Sky) is a satellite broadcasting, broadband and telephone services company headquartered in London, with operations in the United Kingdom (UK) and Ireland. Formed in 1990 by the equal merger of Sky Television and British Satellite Broadcasting, BSkyB is the largest pay-TV broadcaster in the UK and Ireland with over 10 million subscribers.[2][3]

BSkyB is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalization of approximately £14.32 billion (US$23 billion) as of 30 September 2013 on the London Stock Exchange.[4] 21st Century Fox owns a 39.14 per cent controlling stake in the company.[5]

History

Further information: Sky Television plc and British Satellite Broadcasting

British Sky Broadcasting was formed by the merger of Sky Television and British Satellite Broadcasting on 2 November 1990.[6] 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'.[7]

The merger was investigated by Office of Fair Trading[8] but was cleared a month later since many of the represented views were more concerned about contractual arrangements which had nothing to do with competition.[9] 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.[10][11] 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.[12]

Sam Chisholm was appointed CEO [13] 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,[7] 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.[14] 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[15] 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.[16]

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.[17] 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.[18]

Premiership football

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.[19] 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.[20] BSkyB joined forces with the BBC[21] to make a counter bid. The BBC was given the highlights of the most 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. [22] Murdoch has described sport as a "battering ram" for pay-television, providing a strong customer base.[23] 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.[24] 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.[25]

BSkyB retained the rights paying £670m 1997 - 2001 deal, but was challenged by On Digital[26] for the rights from 2001 - 2004, thus were forced to £1.1 billion which give them 66 live games a year.[27]

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.[28]

Sky Multichannels

Main article: Sky Multichannels

The service started on 1 September 1993[29] based on the idea from the then chief executive officer, Sam Chisholm and Rupert Murdoch, of converting the company business strategy to an entirely fee-based concept. The new package included four channels formerly available free-to-air, broadcasting on Astra's satellites, as well as introducing new channels.[30] The service continued until the closure of BSkyB's analogue service on 27 September 2001,[31] due to the launch and expansion of the Sky Digital platform. Some of the channels did broadcast either in the clear or soft encrypted (whereby a Videocrypt decoder was required to decode, but without a subscription card) prior to their addition to the Sky Multichannels package.[32][33] Within two months of the launch, sky gained 400,000 new subscribers, with the majority taking at least one premium channel as well,[34] which helped BSKYB reach 3.5 million households by mid-1994. Michael Grade criticized the operations in front of the Select Committee on National Heritage, mainly for the lack of original programming on many of the new channels.[35]

In October 1994,[36] BSkyB announced its plans to float the company on the UK and US stock exchanges, selling off 20% of the company.[37] 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".[38] Chisholm, become one of the world's most highly paid television executives.[39]

In 1995:

  • BSkyB opened its second customer management centre at Dunfermline, Scotland,[40] to complement its original centre at livingston which opened in 1989.
  • BSkyB entered the FTSE 100 index.
  • Operation profits increased to £155M a year
  • Pearson sold off its 17.5% stake since it had no management control at the company[41]

Sam Chisholm resigned from BSkyB due to a rift with Rupert Murdoch.[42] 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.[43]

Sky Digital

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.[44] A few days afterwards BSkyB left the consortium, and work fully concentrated on its digital satellite network.

The launch of the Astra 2A satellite at a new orbital position, 28.2° east, in 1998 (subsequently followed by more Astra satellites as well as Eutelsat's Eurobird 1 (now Eutelsat 28A) at 28.5°E), enabled the company to launch a new all-digital service, Sky, with the potential to carry hundreds of television and radio channels.[45]

Sky's digital service was officially launched on 1 October 1998 under the name Sky Digital, At this time the use of the Sky brand made an important distinction between the new service and Sky's analogue services. Key selling points were the improvement in picture and sound quality, increased number of channels and an interactive service branded Open.... now called Sky Active, Sky competed with the ONdigital (later ITV Digital) terrestrial offering. Within 30 days, over 100,000 digiboxes had been sold, which help bolstered Sky's decision to give away free digiboxes and minidishes from May 1999. By June 2000 the service had 3.6 million subscribers, which gave Sky 8.988 million subscribers across all platforms. This substantial growth reflected Sky’s 34% share of viewers in multi-channel homes (up from 13.4% from 1999).[46]

New Astra satellites joined the position in 2000 and 2001, and the number of channels available to customers increased accordingly. This trend continued with the launch of Eurobird 1 (now Eutelsat 28A) in 2001. Additionally, some channels occasionally received new numbering — However, in early 2006, the majority of channels received new numbering, with some receiving single digit changes, whilst others received new numbers entirely.

Originally Sky launched with a set top box known as the Sky digibox, using the Slogans "What do you want to watch?", "Entertainment your way" and the current slogan "Believe in Better".[47] In more recent years the Sky+ and Sky+ HD boxes have launched alongside the original box. Sky+ is a digital video recorder with an internal hard drive which allows viewers to 'pause live television' (by switching from a live feed to a paused real-time recording that can be restarted at any point) and schedule programs to record in the future. Sky launched HDTV services in May 2006. The first photos of a prototype Sky HD receiver began appearing in magazines in August 2005. All Sky+ HD receivers incorporate a version of Sky+ using a 300GB, 500GB, or 1TB hard drive (of which 160GB, 250GB or 500GB are available to the user) to accommodate the necessary extra data.

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."[48] 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.[49] Within 18 months the channels failed to make impact, and were outsourced to the Chart Show Channels company.[50]

By June 2005, the number of digital subscribers increase to 7.8m, while it produced 38,375 hours of sport in 2005[51]

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."[52]

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.[53]

Virgin Media dispute

Virgin Media (re-branded in 2007 from NTL:Telewest) started to offer a high-definition television (HDTV) capable set top box, although from 30 November 2006 until 30 July 2009 it only carried one linear HD channel, BBC HD, after the conclusion of the ITV HD trial. Virgin has claimed that other HD channels were "locked up" or otherwise withheld from their platform,[54] although Virgin did in fact have an option to carry Channel 4 HD in the future.[55][56] Nonetheless, the linear channels were not offered, Virgin instead concentrating on its Video On Demand service[57] to carry a modest selection of HD content.[58] Virgin has nevertheless made a number of statements over the years, suggesting that more linear HD channels are on the way.[54][59][60]

In 2007, BSkyB and Virgin Media became involved in a dispute over the carriage of Sky channels on cable TV. The failure to renew the existing carriage agreements negotiated with NTL and Telewest resulted in Virgin removing the basic channels from the network on 1 March 2007. Virgin claimed that Sky had substantially increased the asking price for the channels, a claim which Sky denied, on the basis that their new deal offered "substantially more value" by including HD channels and Video On Demand content which was not previously carried by cable.[61]

In response, Sky ran a number of TV, radio and print advertisements claiming that Virgin media 'doubted the value' of the channels concerned, at first urging Virgin customers to call their cable operator to show their support for Sky, but later urging Virgin customers to migrate to Sky to continue receiving the channels. The broadcasting regulator Ofcom subsequently found these commercials in breach of their code.[62]

The availability (at an extra charge) of Sky's premium sport and movie services was not affected by the dispute, and Sky Sports 3 was offered as a replacement to Sky 1 on many Virgin Media packages. This impasse continued for twenty-one months, with both companies initiating High Court proceedings.[63] Amongst Virgin's claims to the court[64] (denied by Sky) were that Sky had unfairly reduced the amount which it paid to VMTV for the carriage of Virgin's own channels on satellite.[65]

Eventually, on 4 November 2008 it was announced that an agreement had been struck for Sky's basic channels – including Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts 1, Sky Arts 2, Sky Real Lives and Sky Real Lives 2 to return to Virgin Media from 13 November 2008 until 12 June 2011. In exchange, Sky would be provided continued carriage of Virgin Media Television's channels – Living, Livingit, Bravo, Bravo +1, Trouble, Challenge and Virgin1 for the same period.[66]

The agreements include fixed annual carriage fees of £30m for the channels with both channel suppliers able to secure additional capped payments if their channels meet certain performance-related targets. Currently there is no indication as to whether the new deal includes the additional Video On Demand and High Definition content which had previously been offered by Sky. As part of the agreements, both Sky and Virgin Media agreed to terminate all High Court proceedings against each other relating to the carriage of their respective basic channels.[67]

On 4 June 2010, BSkyB and Virgin Media announced that they had reached agreement for the acquisition by Sky of Virgin Media Television.[68][69]

Virgin1 was also a part of the deal but was rebranded as Channel One on 3 September 2010, as the Virgin name was not licensed to Sky.[70][71] The new carriage deals are understood to be for up to nine years.[72]

On 29 June 2010, The Competition Authority in Ireland cleared the proposed transaction.[73]

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.[74] 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.[75]

2010s

BSkyB's direct-to-home satellite service became available in 10 million homes in 2010, Europe's first pay-TV platform in to achieve that milestone. Confirming it had reached its target, the broadcaster said its reach into 36% of households in the UK and Ireland represented an audience of more than 25m people. The target was first announced in August 2004, since then an additional 2.4m customers had subscribed to Sky's direct-to-home service. Media commentators had debated whether the figure could be reached as the growth in subscriber numbers elsewhere in Europe flattened.[76]

BSkyB announced that it was moving some channels further up the listings of its electronic programming guide. It was, reported Broadband TV News, the biggest reshuffle in EPG positions for over a decade, with MTV, Comedy Central, Universal, Syfy, News Corporation's FX, and 40 HD channels moving to more prominent places.[77]

In early 2012, Sky released an update to its Sky Anytime service. This update offers customers the chance to buy and rent films from the Sky Store. In June 2012, Sky launched a new EPG for Sky+ HD boxes. The update boasts a new modernised look and improved functionality.

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.[78]

In September 2012, United Kingdom broadcasting regulator Ofcom ruled that BSkyB could stay on air — but it criticised former chairman Murdoch's handling of the News International phone hacking scandal.[79] ‘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.[80]

On 26 September 2012, BSkyB relaunched its "Anytime+" on-demand-via-broadband service as "On Demand" as the BBC’s iPlayer joined the line-up of channels offering catch-up TV on the company’s Sky+HD box – linked to a router, the signal from which was recorded before viewing. The BBC was making the preceding week’s programmes available alongside ITV, Channel 4’s 4oD, Channel 5 and the partly BBC Worldwide-owned UKTV, as well as BSkyB’s own channels.[81]

London’s right-of-centre Daily Mail reported that the UK government’s benefits agency was checking claimants’ ‘Sky TV bills to establish if a woman in receipt of benefits as a single mother is wrongly claiming to be living alone’ – as, it claimed, subscription to sports channels would betray a man's presence in the household.[82] And, in December, the UK’s parliament heard a claim that a subscription to BSkyB was ‘often damaging’, along with alcohol, tobacco and gambling. Conservative MP Alec Shelbrooke was proposing the payments of benefits and tax credits on a "Welfare Cash Card", in the style of the Supplemental Nutrition Assistance Program, that could be used to buy only "essentials".[83]

Competition

On 12 July 2011, former Prime Minister, Gordon Brown claimed that BSkyB's majority owner - News Corporation attempted to affect government policy with regards to the BBC in pursuit of its own commercial interests.[84] He went further, in a speech in Parliament on 13 July 2011, stating:

"Mr James Murdoch, which included his cold assertion that profit not standards was what mattered in the media, underpinned an ever more aggressive News International and BSkyB agenda under his and Mrs Brooks’ leadership that was brutal in its simplicity. Their aim was to cut the BBC licence fee, to force BBC online to charge for its content, for the BBC to sell off its commercial activities, to open up more national sporting events to bids from BSkyB and move them away from the BBC, to open up the cable and satellite infrastructure market, and to reduce the power of their regulator, Ofcom. I rejected those policies." [85]

On 13 July 2011, MP Chris Bryant stated to the House of Commons, in the Parliamentary Debate on the Rupert Murdoch and News Corporation Bid for BSkyB that the company was anti-competitive:

"The company has lots of technological innovation that only a robust entrepreneur could to bring to British society, but it has also often been profoundly anti-competitive. I believe that the bundling of channels so as to increase the profit and make it impossible for others to participate in the market is anti-competitive. I believe that the way in which the application programming interface—the operating system—has been used has been anti-competitive and that Sky has deliberately set about selling set-top boxes elsewhere, outside areas where they have proper rights. If one visits a flat in Spain where a British person lives, one finds that they mysteriously manage to have a Sky box there even though it is registered to a house in the United Kingdom."[86]

Corporate

Management

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.[87]

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.[88]

Attempted takeover by News Corp

Main article: News Corporation takeover bid for BSkyB

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.[89]

Subsidiaries

British Sky Broadcasting Ltd
The original Sky Television plc, now a holding company.
Sky Subscriber Services Ltd
Operating company for the Sky pay-television service.
Sky Broadband Ltd
Operating company for Sky's broadband and telephony services.
Sports Internet Group Ltd
Sports content and online betting services.
British Interactive Broadcasting Holdings Ltd
Interactive television services, formerly an alliance of BSkyB, BT Group, HSBC and Matsushita.
Mykindaplace.com (defunct)
Being both an agency and a media owner, run many successful sites.
Aura Sports Ltd
Media Sales Agency, sells advertising on the majority of premiership football club websites, as well as other major sports.
Aura Play Ltd
Another Media Sales Agency, sells advertising across a number of websites in the music and entertainment sector.
Sky Ireland
Operating company for Sky pay-television service in Ireland.
Acetrax
A video on demand movie rental service.[90]
The Cloud
Wi-Fi provider acquired by BSkyB.[91]

Ventures

A+E Networks UK (50%) – with A+E Networks. Operates History (UK), Bio. (UK) and Crime & Investigation Network (UK) channels.
Attheraces Holdings Limited (48.5%)[92] – with Arena Leisure. Operates At the Races.
Australian News Channel Pty Limited (33.3%)[92] – with Seven Network and Nine Entertainment Co.. Operates Sky News Australia.
Nickelodeon UK Ltd (40%)[92] – with Viacom International Media Networks Europe, part of Viacom. Operates Nickelodeon and associated channels.
Zeebox (10%).[93]

Partnerships

Comedy Central (UK and Ireland) (25%)[92] – with Paramount British Pictures, part of Viacom
DTV Services Ltd (20%) – with Arqiva, BBC, Channel 4 and ITV plc. Manages and markets the Freeview brand.[94]
NGC Network International LLC and NGC Network Latin America LLC (21%)[92] – with National Geographic.

Stake in ITV

ITV plc has been the subject of a flurry of rumored take-over and merger bids since it was formed. For example, on 9 November 2006, NTL announced that it had approached ITV plc about a proposed merger.[95][96] The merger was effectively blocked by BSkyB on 17 November 2006 when it controversially bought a 17.9% stake in ITV plc for £940 million,[97] a move that attracted anger from NTL shareholder Richard Branson[98] and an investigation from media and telecoms regulator Ofcom.[99] On 6 December 2006, NTL announced that it had complained to the Office of Fair Trading about BSkyB's move. NTL stated that it had withdrawn its attempt to buy ITV plc, citing that it did not believe that there was any possibility to make a deal on favourable terms.[100]

Finance

Financial results have been as follows:[1]

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