MEDIA: SPOTLIGHT ON; CABLE TV: Will the cable merger cause much concern for Murdoch?

Alasdair Reid looks at the implications of the cable industry merger for BSkyB

Alasdair Reid looks at the implications of the cable industry merger for


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

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