Murdoch guns for digital rivals

RUPERT MURDOCH'S willingness to spend hundreds of millions of pounds attempting to dominate the television market was revealed again yesterday when BSkyB announced it will give a free set-top box to all new subscribers to SkyDigital.

A massive new promotional onslaught also includes an offer to slash the cost of subscribers' standard rate phone calls by 40 per cent, as well as the launch of a free Internet service, SkyNow. The whole digital television deal will cost BSkyB, 40 per cent owned by Mr Murdoch, pounds 315m and has forced the company to suspend paying dividends to its shareholders.

The chief executive of BSkyB, Mark Booth, said his intention was "to take Sky to every home in the country", arguing that people would actually save money by signing up to the service - with the savings on phone bills being more than enough to pay for Sky's basic pounds 7-a-month "Family Value" package of channels.

Sky will charge new subscribers a pounds 40 installation fee. The company said it would switch off all its analogue services at the end of 2002, saving it pounds 50m in transmission costs. The decision is likely to bring forward the date when the Government decides to end all television analogue services - possibly to about 2010.

Sky also said it had secured 551,000 customers for digital satellite channels since its launch last October. It was this, according to Mr Booth, that had given the company the confidence to put together the new package. The deal is also, to some degree, being financed by increased subscription rates with the most expensive Sky package going up, by pounds 2 a month, to pounds 32.

It will, according to City analysts, put the company in a strong position to win the vital rights to Premier League football when they come up for auction in 2001. Last month the company's bid to buy Manchester United was thwarted by the Monopolies and Mergers Commission; but, said analysts, retaining the Premier League rights would soften the blow.

But the BSkyB move is primarily seen as raising the stakes in the billion- pound three-way battle to win customers for digital television. "The gloves are off," said one business analyst. "This raises the ante - the phoney war is over," said another.

ONdigital, the terrestrial service launched last year, is the smallest of the players and was roundly scoffed at by Mr Booth yesterday. "ONdigital are a successful niche player, but they will always be a niche," he said, referring to the fact that Sky will eventually offer hundreds of channels and services, compared with ONdigital's 30 channels. ONdigital, meanwhile, is to launch its own free set-top box service.

But the biggest challenge to Sky will come from cable companies, such as Cable and Wireless, which yesterday said that it too will offer set- top boxes and free Internet access when its digital service starts in July. The company's 1.2m customers will then have access to 200 channels.

But Sky's ambitions, to some degree, swamp both the competitors, in that it is seeking to dominate programming, especially of sports and movie channels, as well as providing the means of transmission, the satellite service, and taking a stake in the hardware. It emerged yesterday that Sky is about to do link-up deals, possibly with the Japanese manufacturer Sony, to sell the integrated televisions that will eventually make set- top decoders redundant.

At the same time, Sky's expansion on the programming side has been so successful that it dominates the schedules on its rivals platforms - to the extent that according to Mr Booth, Sky siphons off 60 per cent of ONdigital's revenues.

One analyst said yesterday: "It is typically Murdoch to seek such close integration in all parts of the business." The Murdoch on show for the announcements, though, was not Rupert, but his daughter Elisabeth, Sky's general manager, who sat in the front row of the audience as her outgoing boss, Mr Booth, outlined his new deal.

Mr Booth said Sky has secured 551,000 digital customers since its launch last October, putting it on target to exceed the 1m target it has set for the year. The next step will be an enormous promotional campaign, with one of the biggest advertising budgets on record. Sky has already spent pounds 50m on promotion, and is about to invest another pounds 20m.

There appeared, yesterday, to be no regulatory barriers to Sky's new offer, with the communications industry watchdog Oftel saying it saw no reason for an investigation.

t German football supporters and tabloids protested strongly yesterday as Rupert Murdoch clinched the television rights for the European Champions League for his tiny, almost unknown TM3 women's health and lifestyle channel.

The country's most popular newspaper, Bild, carried the headline "TV shark Rupert Murdoch raids Germany".

News analysis, page 18

THE THREE CHALLENGERS: WHICH IS THE BEST?

Up front

costs

What you

need

Minimum

subscription

Summary

Sky Digital

pounds 40 if you subscribe to a Sky package.

pounds 100 if you only take free to air channels

A satellite dish and a set-top box connected by a length of cable installed by an engineer.

pounds 6.99 For 20 basic channels including Sky 1, UK Gold, History Channel, Discovery.

The service which has it all, including an unsightly dish and the probability that once Sky has dispensed with the competition, charges will go through the roof.

ONdigital

pounds 199 or free with purchase of a TV worth pounds 200 during May.

DIY installation of set-top box connected to existing aerial

pounds 7.99 for 15 channels including some free ones like BBC News 24 and Sky 1, MTV, Cartoon Network and UK Gold.

Looking like the BSB of the Nineties, it may not go the way of the `Squarial' because eventually analogue transmissions will be switched off OnDigital will be the easiest thing to switch to.

Cable &

Wireless

Digital

(launches later

this year)

Free for those who have signed up to cable since October last year. pounds 40 to other subscribers.

Cable going down your street and a set top box - the cost of which is covered by monthly subscriptions.

Likely to be pounds 9.99 for five channels including Sky News, UK Horizons and ITV 2, in addition to free terrestrial channels

Could be Sky's real competition but will launch a year late and relies on Sky for movies and sport. It's future may rely more on telecom and internet services.