BBC plans eight pay channels

The BBC last night confirmed plans to launch eight pay-TV channels in the United Kingdom next summer, as part of its high-stakes bid to develop the corporation into a global television company.

The new channels, including high-brow arts and culture, documentaries, lifestyle, sports and entertainment, will be developed as a pounds 200m joint venture with Flextech, the UK cable and satellite company controlled by United States media baron John Malone's TCI.

The BBC also plans to work with TCI's US associate, Discovery, to develop channels in the US, in a separate deal worth up to $500m (pounds 325m). In each case, the BBC would contribute programming but invest no money.

The news will be a huge disappointment to BSkyB, Rupert Murdoch's satellite giant, which had been eager to do its own channel development deal with the BBC. But a BBC source said an agreement with Mr Murdoch, who dominates the UK pay-television market, would have been "politically and strategically impossible".

All the same, the channels, which the BBC said would be made available to satellite and cable viewers, could still be distributed as part of BSkyB's existing multi-channel package, depending on the outcome of talks in coming months.

Roger Luard, chief executive of Flextech, said: "I think BSkyB is likely to be interested in carrying the new services."

The channels could be highly lucrative, depending on the number of viewers who agree to pay subscription fees. The BBC has already made notional capital gains of about pounds 20m from its stake in UK Gold, the nostalgia pay-TV channel it shares with Pearson, Flextech and other media companies.

In separate negotiations, not yet completed, Flextech is also planning to buy out other shareholders in UK Gold. As a result, Pearson and Cox Communications of Atlanta would take non-voting stakes in Flextech.

"Both Flextech and Discovery have successful track records in the development of subscription channels," Bob Phillis, chief executive of BBC Worldwide, the Corporation's commercial arm, said. Richard Emery, managing director of BBC Worldwide Television, added: "We believe this will greatly increase our ability not only to augment the licence fee but also to maximise in future the commercial value of BBC programmes."

Even more lucrative could be the US joint venture with Discovery. According to a senior BBC source involved in the negotiations, the deal "offers us access to the US market, something we have never had before, and that should give the BBC the ability to become a much bigger global player". Adam Singer, president of the international arm of TCI said the deal "shows the power of the global alliance we can build".

The confirmation that Flextech and the BBC had entered "exclusive negotiations" leading to a final agreement by the end of the year marks the most concrete sign yet of the Corporation's strategy for the era of multichannel television.

But the deal is sure to revive concerns, none the less, that the BBC is requiring licence fee payers to fork out subscription fees even for repeats of archive or library programming already paid for by the taxpayer.

The negotiations, which have taken more than two months, were led on the BBC side by Matthew Symonds, a former senior editor at The Independent. According to sources at Flextech and the BBC, he is in line to become chief executive of the new joint venture.