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
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 sky.com and its skysports.com 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
It makes sense for them to address it, especially as digital and
e-business will, increasingly, underpin the whole range of the (Murdoch)
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