Bsb Versus Sky Tv
Executive Summary
British television viewing levels had stagnated in the 1980s due to already high levels of television viewership (3.5 hours per day) and the rapid penetration of the VCR. This caused broadcast companies like BBC and ITV to look for new ways to spurn growth. The British government tried to allocate three of the five high powered digital satellite broadcast (DBS) channels first to the BBC and then to a joint venture between BBC and ITV. Both attempts failed due to high startup costs in building and launching dedicated satellites. The bidding for these channels was then moved to the private sector in April 1986. Additionally, the use of the untried D-MAC transmission standard that was viewed as a move towards HDTV was made mandatory.
British Satellite Broadcasting (BSB) was to be the first mover and quickly acquired a 15 year franchise for the DBS channels. BSB planned to start broadcasting by the fall of 1989, investing $500 million and projecting to break-even 4 years later. Sky Television a subsidiary of Rupert Murdoch’s News Corporation unexpectedly announced its entry into the satellite broadcasting market. Murdoch known for his aggressiveness aimed to start broadcasting from Sky’ leased medium powered satellite by February 1989 becoming the real first mover in the market. This led to an intense battle between BSB and Sky as they fought to gain the upper hand. By October 1990, both BSB and Sky were making combined losses of $10 million per week.
BSB’s inability to view the competitive landscape combined with Sky’s aggressive tactics to leverage first mover advantage lead to both companies losing focus on the underlying economics in the launch of what is regarded the second biggest business undertaking in Britain (second only to the Chunnel). BSB’s superior technology has the upper hand long term but, Sky’s overall superior economic model allows it to sustain losses for a longer period possibly outliving BSB’s investor’s faith in the
British television viewing levels had stagnated in the 1980s due to already high levels of television viewership (3.5 hours per day) and the rapid penetration of the VCR. This caused broadcast companies like BBC and ITV to look for new ways to spurn growth. The British government tried to allocate three of the five high powered digital satellite broadcast (DBS) channels first to the BBC and then to a joint venture between BBC and ITV. Both attempts failed due to high startup costs in building and launching dedicated satellites. The bidding for these channels was then moved to the private sector in April 1986. Additionally, the use of the untried D-MAC transmission standard that was viewed as a move towards HDTV was made mandatory.
British Satellite Broadcasting (BSB) was to be the first mover and quickly acquired a 15 year franchise for the DBS channels. BSB planned to start broadcasting by the fall of 1989, investing $500 million and projecting to break-even 4 years later. Sky Television a subsidiary of Rupert Murdoch’s News Corporation unexpectedly announced its entry into the satellite broadcasting market. Murdoch known for his aggressiveness aimed to start broadcasting from Sky’ leased medium powered satellite by February 1989 becoming the real first mover in the market. This led to an intense battle between BSB and Sky as they fought to gain the upper hand. By October 1990, both BSB and Sky were making combined losses of $10 million per week.
BSB’s inability to view the competitive landscape combined with Sky’s aggressive tactics to leverage first mover advantage lead to both companies losing focus on the underlying economics in the launch of what is regarded the second biggest business undertaking in Britain (second only to the Chunnel). BSB’s superior technology has the upper hand long term but, Sky’s overall superior economic model allows it to sustain losses for a longer period possibly outliving BSB’s investor’s faith in the