Sky plans 200 digital channels

BSkyB, the satellite broadcasting company, plans to launch 200 digital television channels from autumn of next year, using capacity on a soon- to-be-launched Astra digital satellite, the company's chief executive, Sam Chisholm, confirmed yesterday.

The service would be available to any home in the UK equipped with a digital decoder, which Sky hopes will be priced at about pounds 200.

Between 60 and 100 channels will be used to broadcast films on "near demand", with start times staggered so that viewers need not wait more than 15 minutes before the start of a chosen film.

Mr Chisholm said the contracts with Hollywood studios would mean sharing the revenues from pay-per-view.

News of Sky's digital plans came as the company unveiled record pre-tax profits ahead 71 per cent to pounds 178m, on turnover of pounds 736m, in the nine months to 31 March.

"The excellent financial performance reflects the continued growth in our subscriber base," Mr Chisholm said. The new digital services would free up capacity on existing satellites, which could then be used to broadcast channels for continental Europe, Sky sources said.

BSkyB, 40 per cent owned by Rupert Murdoch's News Corporation, recently announced a joint venture with three continental media companies to launch new pay-TV services in Europe, starting in Germany.

BSkyB's shares rose 8p to 462p on the results, but settled back to 454p, flat on the day. Analysts said the figures were in line with expectations, and sounded a cautious note about future earnings potential.

"There are real concerns about the regulatory environment," said one leading analyst. The pay-TV market in the UK is currently the subject of an inquiry by the Office of Fair Trading, following complaints by cable operators over the terms under which Sky's satellite programming is supplied to them. They say Sky's near- monopoly over programming, satellite capacity and subscription-management systems makes the company the effective "gatekeeper" in pay-TV.

"If the OFT does not do something, then European competition authorities probably will," said another media analyst. "Either way, the current trends are probably not sustainable."

The European Commission has also expressed concern about the company's dominant position in the pay-TV industry, and is believed to be studying the implications of BSkyB's continental alliance.

In the UK, the OFT inquiry is "a very crucial issue as Sky position themselves for digital", Anthony de Larrinaga, analyst at Panmure Gordon, said.

Sky sources discounted the effects of any OFT intervention. They claim that the new digital platform would be open to other broadcasters, on a "fair and equitable basis".

But competitors are not convinced. "There is a very real fear that Sky will dominate digital just as they have dominated analogue," said a source at a leading cable operator.

Management at BSkyB said the company's new digital programming services would allow it to continue to push up both subscription fees and the number of subscribers.

Year-on-year, Sky has added 800,000 new subscribers, taking the total to 5.35 million, or one-in-five UK households. But the current analogue satellite service is faced with severe capacity restraints. "They need digital to allow them to add new programme services," Louise Barton, analyst at Henderson Crosthwaite, said.

Comment, page 19