Alasdair Reid looks at the implications of the cable industry merger for
BSkyB
To many in advertising, the cable industry is about as interesting as
the newspaper distribution business. In other words, not very
interesting at all. Cable is seen as an important link in a chain - but
ultimately it is the messenger rather than the message. And it is in the
unfashionable business of digging holes in roads, which isn’t a Soho-
friendly type of occupation at all.
So all the fuss about last week’s complex deal-making that saw Cable and
Wireless merge its Mercury Communications division with three North
American-owned UK cable operations - Bell Cablemedia, Nynex Cable-Comms
and Videotron - (Campaign, 25 October) may not have caused many ripples
in the advertising business.
But this multiple merger creates the UK’s biggest cable business, with
access to a potential six million homes concentrated in London,
Manchester and Liverpool.
Commenting on the deal, Richard Brown, the chief executive of Cable and
Wireless, said: ‘This deal gives Cable and Wireless critical mass in the
residential market at a stroke.’ Undoubtedly true, and, equally
undoubtedly, this has big implications for the telecoms business as
whole. But will it have any impact on the media marketplace?
The short answer is yes, even though that impact will take months rather
than weeks to be felt. Cable has served notice that it intends to loosen
the vice-like grasp that Rupert Murdoch has on multi-channel television.
Murdoch doesn’t much care for cable. His first lieutenant, BSkyB’s chief
executive, Sam Chisholm, was very sniffy about the industry at a recent
conference - and, instructively, acted as if it were a potential rival,
which many thought odd at the time, given that people who dig holes in
roads aren’t noted for their ability to make TV programmes.
But it was a classic indication of Sky’s attitude towards one of its
business partners. Sky has always believed, so far rightly, that cable
needs Sky more than Sky needs cable - and it has used this power to
dictate terms, not just on how much cable networks should pay for the
privilege of carrying Sky programming, but on how those channels should
be bundled up into subscription packages.
From now on, however, Cable and Wireless will use its ‘critical mass’ to
create more room to manoeuvre, both in terms of its channel packages and
its prices.
Adam Stanhope, the co-founder of the soon-to-be-launched cable-only
channel, Rapture, says that this has to be good news for everyone.
‘BSkyB has undoubtedly driven the multi-channel environment but there is
a downside, too. Some people say that there are too many channels trying
to get on to cable. That is nonsense. The truth is that there are too
many channels on cable for the wrong reasons and they are just not
performing. Now we’ll see cable being able to offer better packages,
more flexibility - in short, what people want.’
Murdoch and Chisholm are right to be suspicious of cable - not just
because it is a superior delivery system that will have a greater
ability to deliver interactive services in the future. The truth is that
it can be more than a just a delivery system - people who dig holes in
roads can make programmes, too. The best example of this is TCI, one of
Telewest’s backers and the world’s biggest operator of commercial cable
systems. It just happens to own Liberty Media in the US, which runs the
Discovery Channel, and Flextech in the UK. Flextech runs or owns several
channels and has also entered into a partnership with the BBC.
If TCI and/or Telewest could be persuaded to work more closely with the
Cable and Wireless set-up, cable really could become a television brand
to reckon with.
Perspective, p21
