Monday, August 6, 2007

The Sky's the limit?

Yesterday, Sunday, Malcolm was net-less, tv-less and (for a briefer period) 'phone-less. That was because the Virgin Megabrand, which now supplies his cable connection, let him down. For several hours. In mid-blog.

Now Malcolm's recent experience of Virgin's broadband provision has been at least acceptable. Nor is he a great consumer of tv pap (BBC News 24 and documentaries apart). So the great BSkyB/Virgin spat passed him by as the idle wind. Except for all the bumpf that the wind, the postal services and the billboards carry. Naturally, though, in his bereft state Malcolm considered his options.

And that prompted a small question in his enquiring mind: how much?

The answer came courtesy of MarketingWeek:

BSkyB spent £734m on marketing in the year to June 30, a £112m - or 18% - rise on the previous 12 months...

Sky, which is embroiled in a public battle against cable rival Virgin Media, also upped its above-the-line spend to £96m, a 28% increase on £75m a year earlier...

Figures released by Nielsen Media Research in July show Sky spent about £70m in the first six months of the year, 40% more than a year earlier and about double the £37m spent by Virgin Media.

Sky is gouging an average of £412 per year out of its customers, with a total profit of £958M.

And one further statistic: BSkyB loses about 15% of its customers each year. In other words, it (like Big Tobacco) has a need to hook that number, or more, of new or returning consumers even to stand still.


So, is all well in the great Murdoch Empire in the Sky?

Well, since Sky makes so much of its sports coverage, Malcolm starts there.

First up is the forthcoming David-Goliath slugfest between Sky and Setanta. As Malcolm understands it, Setanta has snaffled 46 Premier games per season for £392m. Sky, having enjoyed a virtual monopoly since 1992, keeps 92 games a season and first pick for £1.3bn. It only needs a less-fancied team to have a good run for the Setanta bet to pay off well.

And then there's the growing muscle of broadband services. Unless one is a committed "live" sports fan, the offerings from (for example) BTVision begin to look increasingly attractive.

Beyond the touchline, there's the rise-and-rise of Freeview, which is about to overtake Sky subscription as a gross number.

Decline, if not fall?

The last decade has been the fat years for BSkyB. From now on, the going gets tougher, the competition fitter and more numerous.

Greg Dyke, back in 2003, signalled that the BBC would not forever be happy as a dependency of the Sky Astra satellites. That move may have been premature, but it must indicate a state-of-mind in the Beeb. Earlier this year, the BBC and ITV got the go-ahead for an unencrypted high-definition satellite service.

Moreover, the BBC's engineers are implementing ways around the bandwidth limits of Freeview. One avenue is adapting the multiplexing techniques used by mobile phone downloads speeds and for 802.11n Wi-Fi.

James Murdoch has sniffed the wind, too, and is trying to break out of his particular niche, as shown by the acquisition of Amstrad:
Amstrad no longer manufactures set-top boxes. The company designs the kit in conjunction with Sky before outsourcing the manufacture of the products. It is the second leftfield move made by Mr Murdoch since he took over at Sky after the company's acquisition of the business broadband supplier easynet last year. The satellite TV company has since launched broadband and telephony services to try to diversify its business.
Ah, yes, Sky's Achilles heel: upload speed.

Above all there is the savvy consumer, eyeing up Skype as a way of getting out from under telecomms bills. That same wiseacre was shrugging shoulders at the recent anti-Virgin campaign to keep in touch with serials and mini-features by switching to Sky. Such a consumer will already be ahead of the watercooler moment by downloading from Torrents or the Usenet or one of the P2P networks all those US serials the day after they air in Pocatello. When More4 were pushing Studio 60 on the Sunset Strip Malcolm was made aware that more than one young person had already viewed the entire series, without leaving London, by such judicious pirating.

Meslier (not Diderot) revisited

We cannot hope soon to see the last Murdoch throttled by the obsolete RJ45 cable of the last Branson, but the monopolies are under assault. The death-rattle is implicit whenever News International gets sniffy about the BBC licence fee (£135.50 per annum: just a third of the average Sky subscription). Sphere: Related Content

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