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BSkyB frees up boxes

SkyDigital subscribers getting set-top freebie

LONDON — British Sky Broadcasting has announced it is giving away free set-top boxes to subscribers of its SkyDigital platform, a preemptive strike aimed at rival ONdigital and the digital plans of U.K.’s cable operators.

The initiative, which will kick in June 1 and will be supplemented by two additional offers — free Internet access and a 40% discount on British Telecom phone calls — could trigger a price war.

Boxing in

ONdigital, a digital terrestrial platform parented by Carlton and Granada, has revealed it is supplying free boxes to subscribers who purchase any TV over $325. Other marketing ploys, a spokesperson added, are in the works.

Meanwhile, cable operator Cable & Wireless Communications has set July 1 for digital services rollout, beginning in Manchester and the northwest of England, at a cost of about $100 million for the first year.

The U.K. cablers plan to rent, not sell, decoder boxes to customers. The companies also have done well in bundling TV channels with cheap telephony, although the practice is under review by regulatory authorities.

BSkyB chief exec Mark Booth, who is leaving to head up News Corp.’s Internet businesses, said the satcaster’s initiatives will usurp any potential advantages cable may have in the digital market.

‘Removes all the barriers’

“It removes all the barriers to entry for customers,” Booth said. “It will allow us to capitalize on the fastest launch of digital anywhere in the world.”

SkyDigital is now in 551,000 homes — 212,000 of those subscribers new — and well on the way to hitting a stated goal of 1 million subscribers by October.

Customers already signed up will not receive a rebate for the $325 they paid for their boxes, but instead will not pay any increase in subscription rates until 2002. (New SkyDigital subscribers will be charged a one-off $65 installation charge.)

Some observers suggest that BSkyB’s marketing push is tied to its failed bid for the Manchester United soccer club. Being No. 1 in digital subscriptions could help BSkyB rewin the crucial broadcast rights to the English Premier League, of which United is a part, when the rights come up for sale in 2001.

But the company’s damn-the-torpedoes approach is coming at a price. BSkyB is suspending dividend payments to its investors and taking a $510 million hit to fund the transition from analog to digital.

Digital expenses

Digital costs have impacted the company’s profits significantly. Pretax profits for the nine months ending March 31 were $112 million, down from $323 million the previous nine, on sales of $1.85 billion, up from $1.72 billion.

BSkyB said the eventual switching off of analog, skedded for the end of 2002, will bring significant savings — perhaps as much as $80 million a year — because of current “dual illumination costs,” the expense of broadcasting in both analog and digital.