Fool's Eye View

[ October 13, 2000 ]

BSkyB in the News

By Rob Davies (TMFEssex)

Carburton Street, London -- British Sky Broadcasting (LSE: BSY) is now such a dominant company in television, because of its charge into satellite and digital TV, that it is attracting attention from regulators in London and Brussels.

For those of us having trouble keeping up with the twists and turns of the story it is worth reminding ourselves that News Corporation (NYSE: NWS) has a 39.75% stake in the company, which is Murdoch's controlling interest. More recently Vivendi, the French utility that is morphing into a media company, has built up a 24% stake in BSkyB. Kirch, the German media group, sold the 3% stake it acquired in the company as a result of Sky's purchase of German TV interests this year.

Vivendi is seeking regulatory approval to buy Seagram, the Canadian company that owns Universal music and film studios. But as it already owns Canal Plus, Europe's largest pay TV company, there are competition issues here. Today Vivendi announced that it has agreed to sell its stake in BSkyB in order to secure European regulatory approval for the Seagram deal. Quite what Vivendi has paid on average for its stake is not known, but it must be pretty high as the shares peaked at 2158p. Today they are trading at 873p so a disposal could involve a significant loss for the French company. Will the French increase train fares on Connex to cover the shortfall?

Yesterday the British Government got involved when it said that it intends to seek undertakings from BSkyB to remedy competition concerns over its acquisition of British Interactive Broadcasting (BIB). The issue here is that Sky will sell premium TV channels to rival distributors. But if that content contains interactive elements it could mean that the rival broadcaster would be unable to show these programmes without complications. That could damage their commercial interests. To get round this problem the Government will ask Sky to supply a "clean feed" -- in other words, without interactive elements -- to its rivals to ensure a proper choice for consumers.

All this adds up to a mixed picture for BSkyB shareholders. On the one hand the prospect of a quarter of the company being placed will damage the share price. On the other hand the demonstration of the real competitive advantage that interactive TV gives it must be good news. After all, Pace Micro Technology (LSE: PIC), which makes the ubiquitous set top boxes that Sky Digital give away, estimates that by the end of 2000 more UK homes will be connected to the Internet by the TV than the PC. And, unlike ISPs, Sky can charge a subscription to grant that access.


Where Next?

For more comments on interactive TV, go to the BSkyB and/or the Pace Micro Technology discussion boards.