British Satellite Broadcasting
|Fate||Merged with Sky Television plc to form BSkyB.|
|Headquarters||Marco Polo House, London, England, UK|
|Products||Pay TV services
British Satellite Broadcasting (BSB) was a television company headquartered in London, which provided direct broadcast satellite television services to the United Kingdom. The company was merged with Sky Television plc in November 1990 to form British Sky Broadcasting (BSkyB). It started broadcasting on 25 March 1990.
In 1977 the World Administrative Radio Conference assigned each country five high-powered channels for direct broadcast by satellite (DBS) for domestic use. in 1982 after being awarded two of the channels the BBC proposed its own satellite service, with two conditions:
- Used a satellite built by "United Satellite", a consortium of British Aerospace, Marconi and GEC, with cost estimated at £24M per year.
- A supplementary charter was agreed in May 1983 which allowed the BBC to borrow up to £225M to cover the cost of the project as it was not allowed to call on public funds, nor use existing sources of revenue to fund the project
During Autumn 1983, the cost of the Unisat had been greatly under estimated, and the new Home Secretary announced the three remaining channels would be given to the IBA to allow the private sector to compete against the BBC on the DBS. within a few months the BBC started talking with the Independent Broadcasting Authority (IBA), about providing a joint project to help cover the cost. Subsequently, government allowed the IBA to bring in private companies to help cover the costs (dubbed the "Club of 21"):
- the BBC - 50%
- ITV franchises Granada and Anglia Television - 30%
- Virgin / Thorn-EMI / Granada TV rentals / Pearson Longman and Consolidated Satellite Broadcasting - 20%
With a year the consortium made it clear that the original launch date of 1986 was pushed back to 1988, while also asking the British government to allow them to tender out the building of the new satellite system, to help reduce cost. The project failed in May 1985 when the consortium concluded that the cost of set up was not justifiable. The BBC stated the costs were prohibitive, because the government insisted that the BBC should pay for the costs of constructing and launching a dedicated satellite.
The IBA convinced the Home Secretary to revive the DBS project but under different conditions, (broadly based on a report drawn up by John Jackson) by inviting private sector companies to apply for a new television franchise via satellite, to provide a commercial service on three of the five DBS in April 1986. One of the conditions imposed on applicants by the IBA was that they use a new, untried transmission standard, D-MAC. This standard was part of the European Community’s attempt to promote a high-definition television (HDTV) standard being developed by Philips and other European companies, HD-MAC. HD-MAC was still at the laboratory stage and was incompatible with previous standards: HD-MAC transmissions could not be received by existing television sets, which were based on PAL or SECAM standards in Europe. The conditions to use a High power (230 watts) Satellite was dropped, and no winner was precluded from buying a foreign satellite system.
The IBA received five serious bids for the Direct Broadcast Satellite franchises. It also received submission from the The Children's Channel and ITN to make sure their programmes are used on any successful bid.
- British Satellite Broadcasting: Consortium by Granada Television, Pearson, Virgin Group, ITN, Anglia Television and Amstrad.
- DBS UK LTD: Consortium by Carlton Communications, LWT, Saatchi and Saatchi, Dixons and Robert Fleming Merchant Bank. It planned a sport/news/business channel, entertainment channel, and Super Channel.
- Direct Broadcasting Limited: Consortium by British and Commonwealth shipping, Cambridge Electronic Industries, Electronics Rental Group, Rupert Murdoch's News International and Sears. One channel was for families and children, second channel for films, 3rd channel would have broadcast Sky Channel.
- National Broadcasting Service: Consortium by, James Lee - Former head of Goldcrest Films and Robert Holmes à Court's Bell Group. Promised schedules for children, sport fans along with a news channel.
- SatUK Broadcasting: Created by Muir Sutherland and Jimmy Hartley, back by Australian finanicier Mr Alan Bond and Celtic Films. Proposed Free to air entertainment channel, £5 monthly film channel and a £2 monthly family channel.
British Satellite Broadcasting won the fifteen-year franchise in December 1986 to operate the Direct Broadcasting by Satellite System over four rival bids with a licence to operate three channels. BSB believed 400,000 homes would be equipped during its first year, but some doubts were cast whether this was possible. The Cable Authority welcomed the service, believing it would encourage more users, especially with its dedicated movie channel.
BSB's original satellite channels were:
- Screen: film channel (subscription of £2.50)
- Zigzag: kids and lifestyle channel, shared with Screen.
- Galaxy from 6pm onwards
- Now Original remit was for live 24-hour news:
Around the time of the licence award, Amstrad withdrew its backing as they believed it was not possible to sell a satellite dish for £250. Australian businessman Alan Bond joined the consortium along with Reed International, Chargeurs, Next plc and London Merchant Securities amongst others. BSB earmarked the bulk of the first round of financing for buying and launching two satellites (for redundancy and provision of further channels later) and planned a second round close to the commencement of broadcasting operations. It commissioned Hughes Aircraft to provide two high-powered satellites using launch vehicles from McDonnell Douglas. Both companies were American and had established reputations for reliability. Crucially, Hughes was main contractor and offered a commercial space industry first, "in orbit delivery", whereby BSB's risk was reduced because payments were due after the satellites were launched and operational.
On 8 July 1988 rival tycoon Rupert Murdoch, having failed to gain regulatory approval for his own satellite service, and failing to become part of the BSB consortium announced that his pan-European television station, Sky Channel, would be relaunched as a four channel UK-based service called Sky Television, using the Astra system and broadcast in PAL with analogue sound. BSB had been aware of the impending launch of Astra when it submitted its proposal to the IBA in 1986, but had discounted it. Lazard Brothers, the Pearson subsidiary responsible for BSB’s first fundraising memorandum, reportedly regarded Astra as technology-led rather than programming-led and, therefore, an unlikely threat.
The stage was set for a dramatic confrontation. BSB, anticipated as the UK's only satellite service, was faced with an aggressive drive by Murdoch's Sky to be the first service to launch. As Britain's official satellite television provider, BSB had high hopes, as the company planned to provide a mixture of highbrow programming and popular entertainment, from arts and opera to blockbuster movies and music videos. The service would also be technically superior, broadcasting in the D-MAC (Multiplexed Analogue Components type D) system dictated by European Union regulations with potentially superior picture sharpness, digital stereo sound and the potential to show widescreen programming, rather than the existing PAL system. BSB criticised Sky's proposals, claiming that the PAL pictures would be too degraded by satellite transmission, and that in any case, BSB would broadcast superior programming. SES had no regulatory permission to broadcast, had plans (initially) for only one satellite with no backup and the European satellite launch vehicle Ariane suffered repeated failures. However SES used the resulting delay time to re-engineer the satellite to reduce the dish size needed which would otherwise have been larger than 60 cm (24"). To distance itself from Sky and its dish antennas, BSB announced a new type of flat-plate satellite antenna called a "Squarial" (i.e., "square aerial"). The illustrative model Squarial shown to the press was a dummy and BSB commissioned a working version which was under 45 cm (18") wide. A conventional dish of the same diameter was also available. The company had serious technical problems with the development of ITT's D-MAC silicon chips needed for its MAC receivers. BSB was still hoping to launch that September 1989, but eventually had to admit that the launch would be delayed.
During the summer, in a bid to gain more viewers BSB/BBC prepared a bid for a four-year deal for the rights to broadcast top league football, thus outbidding ITV £44m offer; BSB had also committed about £400 million to tying up Paramount, Universal, Columbia, and MGM/United Artists, with total up-front payments of about £85 million. These expenditures and commitments were budget-breakers because BSB had less money left for its other two channels than the BBC or ITV had for one.
BSB's costs had started to rocket, reaching £354million, while Chief Executive Anthony Simons Gooding denied that BSB had gone over budget and would require more than the planned £625m it required to operate up to 1993. In December 1988, Virgin pulled out of the BSB consortium, ostensibly because it was going private again. Virgin had also become increasingly concerned about BSB’s mounting costs.
The film-rights battle proved to be the final straw for Virgin, since it would necessitate a "supplementary first round" of financing of £131 million in January 1989 in addition to the initial £222.5 million. After unsuccessfully offering its stake in BSB to the remaining founders, Virgin sold it to Bond Corporation, already BSB’s largest shareholder, for a nominal profit.
Despite the delayed launch, BSB continued to invest heavily in marketing in 1989 to minimize the effects of Sky’s timing advantage. BSB also received a needed boost in June 1989 when they won the franchises for the two remaining British high-powered DBS channels; beating six other bidders when the BBC dropped all plans for use of the allocated channels. BSB revised its line-up to include separate channels for films, sports, pop music, general entertainment and living/current affairs. Unfortunately, this increased the size of the dishes which the public had to purchase from 25 centimeters to 35–40 centimeters; subsidies from BSB helped maintain retail prices at £250.
Launch of the channels
BSB's six satellite channels were:
BSB launched its service on 26 March 1990, with the slogan It's Smart to be Square. The launch, six months late, was 14 months after Sky's launch. BSB were due to start broadcasting in September 1989 but were delayed by problems with the supply of receiving equipment and because BSB wanted to avoid Sky's experience of Sky launching when most shops had no equipment to sell. Its D-MAC receivers were more expensive than Sky's PAL equivalents and incompatible with them. With its engaging battle with its bitter rivalry for the home satellite market, both Sky and BSB were haemorrhaging badly, BSB claimed to have around 750,000 subscriptions while Sky had extended its reach into more than 1.5 million homes. It was believed both companies could break even if subscriptions reached three million households, with most analysts expecting this to be reached in 1992.
Launched along with the channels for the general public, BSB Datavision was a subsidiary of the company which offered encrypted television services and data reception to business users through BSB's domestic TV receivers. This included The Computer Channel.
Sky's head start over BSB proved that the PAL system would give adequate picture quality and that many viewers would be happy to watch Sky's more populist output as opposed to waiting for the promised quality programming pledged by BSB. Sky had also launched their multi-channel service from studios at an industrial estate in Isleworth, west London with a 10-year lease on SES transponders for an estimated £50 million without backup. BSB, on the other hand, would operate from more expansive headquarters at Marco Polo House in Battersea, south London with construction and launch of its own satellites costing an estimated £200 million.
When BSB finally went on air in March 1990, 13 months after Sky, the company's technical problems were resolved and its programming was critically acclaimed. However its D-MAC receivers were more expensive than Sky's PAL equivalents and incompatible with them. Many potential customers compared the competition between the rival satellite companies to the format war between VHS and Betamax home video recorders and chose to wait and see which company would win outright as opposed to buying potentially obsolete equipment.
In October 1990, an enterprising manufacturer came up with a dual satellite dish that could be used to receive both Sky and BSB services, although separate receivers would still be required - the following month this technology became effectively obsolete.
Both companies had begun to struggle with the burden of huge losses, rapidly increasing debts and ongoing startup costs. In November 1990, a 50:50 merger was announced to form a single company, operating as British Sky Broadcasting (BSkyB), but marketed as Sky. The merger may have saved Sky financially as it had very few major advertisers at the time, so acquiring BSB's healthier advertising contracts and equipment helped to solve the company's problems.
As the company focused on the Astra system, which was not subject to IBA regulation, the Marcopolo satellites were withdrawn and eventually sold (Marcopolo I in December 1993 to NSAB of Sweden and Marcopolo II in July 1992 to Telenor of Norway). Sky News began broadcasting services to Scandinavia from the Thor satellites.
NSAB operated Marcopolo I (as Sirius 1) until successfully sending it to a safe disposal orbit in 2003 as it reached the normal end of its operational life when fuel ran out. Marcopolo II was operated (as Thor 1) until 2002 and disposed of successfully.
After the merger BSB DMAC receivers were sold off cheaply and some enthusiasts modified them to allow reception of D2MAC services available on other satellites. BSB receivers, Ferguson in particular, could be modified by replacing a microprocessor. Upgrade kits from companies such as Trac Satellite allowed re-tuning whilst other kits allowed fully working menu systems and decoding of 'soft' encrypted channels, although this required the receiver to have one of the later MAC chipsets. Some kits even included smart card readers and full D2MAC decoding capability.
The Marco Polo House headquarters were vacated, leading to redundancy for most BSB staff with only a few moving to work at Sky's HQ in Isleworth. The BSB building was retained by the new company, and in 1993 became the home of shopping channel QVC when its UK channel launched. Broadcasting platform ITV Digital moved into part of the building as part of the settlement that saw Sky forced out of the original company. Marco Polo House was demolished in March 2014.
Following the merger, BSkyB moved quickly to rationalise the combined channels it now owned:
- The entertainment channel Galaxy was closed with its transponders handed over to Sky One.
- The factual, lifestyle and arts channel Now was replaced in the most part with Sky News, although as some arts programming was still to be shown, a short term opt-out service called Sky Arts was launched for broadcast on the Marco Polo transponders at weekends.
- Unlike Galaxy and Now, music channel The Power Station remained on air until 8 April 1991 and was replaced by Sky Movies.
- Unlike Galaxy, Now and the Power Station, sports channel The Sports Channel remained on air until 20 April 1991 and was replaced by a new channel called Sky Sports.
- The Movie Channel remained on air.
Technically, two BSB channels still exist, but cannot be rationalised. The Movie Channel kept its name until 1997, being briefly rebranded as "Sky Movies Screen 2", Sky Premier and then Sky Movies 2. The channel is now Sky Movies Showcase. The Sports Channel retained its name for a while, then was rebranded to Sky Sports in April 1991, and rebranded to its current name, Sky Sports 1, in 1996, when Sky Sports 3 was launched.
A new TV transmission system, Multiplexed Analogue Components (MAC), was originally developed for high definition TV but European TV manufacturers developed patented variants and successfully lobbied regulators such that it was adopted by the EU as the standard for all direct broadcast satellites.
This had the effect that the low cost non-European TV manufacturers would not only have to pay royalties to the EU manufacturers but would also not have direct access to the technology and hence would always be behind with new developments.
In the UK, the Independent Broadcasting Authority developed a variant D-MAC which had marginal audio channel improvements, and insisted on its use by the satellite service to be licensed by itself. On the continent of Europe, satellite TV manufacturers standardised on another variant, D2-MAC, which used less bandwidth and was compatible with the extensive existing European cable systems.
With the launch of BSB the IBA became a member of the secret "MAC Club" of European organisations which owned patents on MAC variants and had a royalty sharing agreement for all TV and set top boxes sold.
The IBA was not directed to be an "economic regulator", so the free market in lower power satellite bandwidth satellites (such as SES-ASTRA) leveraged the benefits of the existing lower cost PAL transmissions with pre-existing set-top box technology. The IBA was rendered helpless and Rupert Murdoch made a voluntary agreement to adhere to those Broadcasting Standards Commission rules relating to non-economic matters, such as the technology used.
Ironically the past-deadline encryption system in the DMAC silicon chip technology was one primary reason for BSB having to merge with Sky and hence the Far Eastern TV manufacturers had largely unfettered access to the market when MAC was dropped in favour of PAL. Sky launched with these free-to-air PAL receivers, adding the VideoCrypt technology when the DMAC system was dropped and Sky Sports and Sky Multichannels was launched.
BSB's shareholders and News International (Murdoch) all made huge profits on their investments, the 50:50 merged venture had an effective multi channel quasi monopoly on UK satellite pay TV. From a UK perspective British Satellite Broadcasting's existence prevented 100% of these profits being made by News International, reducing Murdoch's ability to influence government policy.
At one stage of the saga, News International was facing dismemberment at the hands of its bankers.
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