BSkyB's dominant position is a worry for the ad industry

Forget driving trains, playing football or space travel. The past week has shown that the jobs to dream for as a child are in the arms industry or pay-TV, writes Ian Darby.

The work may be hard and dirty but the rewards are plentiful. But while one is a shady business driven by clandestine meetings and government favours, arms dealing has become a relatively dull and open game. The UK's largest "defence" company, BAe Systems, has even invested in a recent branding campaign.

Evidence of the awards available in pay-TV was demonstrated last week with BSkyB's results announcement. Operating profit of £158m was more than double the figures posted at the same time last year, subscriber levels of 6.6m nudged close to Sky's target of 7m and the average monthly spend per household rose to above £350, closer to Sky's end-of-the-rainbow dream of £400. Add in a friendly government willing to turn a blind eye to any regulatory or competition issues and you have a licence to print money.

It helps Sky's cause that it is a well-run outfit. Coupled with its results announcement was a board reshuffle that saw it replace ageing News Corporation executives with Rupert Murdoch's son James and the former News Corp boss Chase Carey. Both have hands-on experience of running pay-TV companies.

But the worrying aspect for the ad industry is that Sky has achieved its lauded City status and runs a healthy, unchallenged business with so little reliance on advertisers. Clearly its pay-TV model is wholly different to that of, say, ITV and Tony Ball, BSkyB's chief executive, is confident that it can continue its growth regardless or not of a continuation of the advertising recession. The willingness of Sky's audience, including this gullible writer, to pay close to £40 a month for lame Hollywood movies and a few Premiership matches should insulate it from future uncertainty faced by terrestrial operators.

However, there are signs that Sky is also beginning to take advertisers seriously. Agencies may still be lukewarm about its sales operation but its work at the margins, particularly with interactive advertisers, is beginning to bear fruit. Its deal last week with ITV promises much but also raises once again the dangers of having one digital broadcaster in such a dominant position. Cable's interactive advertising offering has never really got off the ground and a massive majority of a growing medium will now be on the Sky platform.

But should this matter? Yes, if advertisers' concerns over lack of choice and competition are of any interest. And the major worry that Sky, a company that can afford to relegate the interests of advertisers down its list of priorities, will gain share at the expense of commercial rivals, remains. The past year has seen that advertiser pressure, notably on ITV, can be a force for good in improving content. There is little chance of this happening with Sky.

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