Media: Spotlight On: BSkyB - Advertisers can look forward to online presence with BSkyB/Sky’s decision to develop its websites is good news indeed, Alasdair Reid says

It’s easy to guess what the City thinks of BSkyB’s decision to invest pounds 250 million on internet and e-commerce ventures. Only hours after last week’s announcement, Sky’s share price leapt almost 19 per cent.

It’s easy to guess what the City thinks of BSkyB’s decision to

invest pounds 250 million on internet and e-commerce ventures. Only

hours after last week’s announcement, Sky’s share price leapt almost 19

per cent.

E-commerce wasn’t the whole story, of course. As expected, Sky revealed

that it had made a whopping loss of pounds 61.5 million in the second

half of 1999 - but this was greeted as a triumph, the red ink being

almost entirely down to the money Sky has spent giving away digital

decoder boxes. Sky is well ahead of its digital targets, having signed

up or converted more than two million subscribers. That’s seen as a more

than satisfactory return on investment.

The City was excited about the new internet commitment, though one

analyst voiced a little concern that there wasn’t more meat on the

bones, which some other analysts thought was rather touching. Meat?

Surely the whole point about the e-commerce sector is that it doesn’t do

meat. In this business, details are a distraction.

All Sky would reveal was the fact that it intended to spend the money

developing its and its websites. It will probably

do this organically from within as well as buying and bolting on

existing operations such as Streets Online, an internet retail operation

(it describes itself as an entertainment e-tailer) in which Sky bought a

pounds 6 million stake last week. The new strategy will almost certainly

dovetail with the continued development of Open, the interactive domain

of Sky’s digital satellite platform.

Not so long ago, BSkyB’s dominant shareholder, Rupert Murdoch, was

arguing that the internet would destroy more businesses than it created.

He’s obviously reassessed that line but his approach is still


Last week, in the wake of the new internet funding commitment, he

categorically ruled out the possibility of a full-blooded new-media pact

along the lines of the AOL Time Warner deal.

But investors believe Murdoch has hit on a sound strategy. Nigel

Sheldon, the managing partner of MindShare Digital, says that it was

essential that Sky increased its internet involvement. He states: ’Sky

has to exploit its content to the full and there’s been a perception

that Sky’s online branding isn’t anywhere near as strong as it is in the

satellite world.

It makes sense for them to address it, especially as digital and

e-business will, increasingly, underpin the whole range of the (Murdoch)

organisation’s activities.’

Are advertisers excited too? For Sheldon, the initial interest will be

in the enhanced sites that will be created. ’Sky has access to rights

and content that it should be able to transfer more readily on to the

online world. Web users are crying out for that. So are advertisers.

They want to see satisfactory environments for their advertising.’

David Stubley, the managing director of Outrider, believes that media

owners are, in theory, ideally placed to become strong players on the

internet - the problem is that as yet none of them have the combination

of vision and resource required to make it happen. He adds: ’Sky is an

incredibly strong brand and it also has vast experience in subscriber

systems, databases and customer management. What they might have lacked,

where the internet is concerned, is the e-commerce expertise.

They’ll still need a lot of help with that but we’ll see them physically

acquiring the expertise.

’If they can get it right, it will be of huge interest to advertisers.

At the simplest level, it means paying Sky to have a presence on site.

The next level is retail partnership, where Sky takes a percentage of

the sales a company achieves through their sites. The third level is

where they talk to Sky as a whole about exclusive promotions.

Stubley concludes: ’The question is about how close advertisers now get

to Sky. Both sides will be enthusiastic about the prospects of moving

beyond the old adversarial relationship they’ve had in the airtime


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