Virtuous circle powers BSkyB ahead

The critics said it could not be done. Then they said it had been done too well. The quite extraordinary growth of cable and broadcaster British Sky Broadcasting from a glint in the eye of media baron Rupert Murdoch to the country's most profitable television company has attracted its fair share of derision, condemnation and, finally, fear and grudging respect from its detractors.

News that his 40 per cent-owned BSkyB, the satellite broadcaster, is campaigning to replace Independent Television News as the dedicated supplier of news for the ITV companies, is further testimony to Mr Murdoch's ever- expanding ambitions.

Last week, BSkyB came of age: now a pounds 6.7bn public company, with stellar profits and rising revenues, the company joined the illustrious FT-SE 100, the list of top equities, following the sale of Pearson's 9.7 per cent stake and the resulting increase in the number of shares which are held publicly.

Sam Chisholm, chief executive and long-time Murdoch confidante, says: "The truth is, anybody could have done it. But only Murdoch had the vision and the guts."

Launched in 1989, beaming signals from the Astra satellite to UK homes equipped with a satellite dish, Sky Television penetrated the first chink in the armour of Britain's coddled television monopolies.

The move drowned Mr Murdoch's other companies, which include News International, in red ink. By the time Sky was merged with its only competition, the anaemic British Satellite Broadcasting, in 1990, there was even talk among his backers of pulling the plug.

Mr Chisholm was enticed from Australia, where he ran Mr Murdoch's Channel 9, in time to oversee the merger of BSB and Sky, creating BSkyB.

A rough few years followed, during which Mr Chisholm introduced the policies that would give BSkyB its legs: long-term supply contracts with Hollywood studios, exclusive sports deals (including pounds 304m for the Premier League) and the transition from "free" TV for anyone with a dish to scrambled, subscription-only services.

The concern from BSkyB's competitors is now whether anyone can catch up. Most analysts are bullish, predicting strong turnover growth in coming years, as the broadcaster aggressively adds new channels - the Disney Channel, the History Channel and European Business News all arrive in the next few weeks. The new channels trigger an increase in subscription prices (which means additional revenue), and expands its overall share of advertising.

While there may be some slowdown in the number of satellite dishes sold in the next five years - those who want them have probably got them - there is potential in the number of UK homes signing up for cable, which also delivers BSkyB's channels. The broadcaster now has 3m direct-to-home subscribers, and another million via cable.

Moreover, digital television is expected to underpin demand for commercial TV by the end of the decade. Provided that BSkyB moves aggressively into digital - and it has already reserved capacity on Astra's digital satellite service, which is ready to beam upward of 200 channels into the UK - then the company looks well positioned.

Mr Chisholm says: "It is our goal to have 10 million subscribers by 2000, and we are confident we will reach it." Of these, perhaps 6-7 million are likely to be cable subscribers.

To keep revenues growing, and to attract more viewers, BSkyB is sticking to a tested strategy. Year by year, it has been adding new programming, and steadily increasing subscription prices. New programming brings in new viewers, and margins improve. "It is a virtuous circle," Mr Chisholm says.