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Satellite synergy

Consolidation, big budgets help forge viewing revolution

LONDON — Consider this: Vic Wakeling, BSkyB’s head of sports, has just kicked off his fall season with a $1.3 billion annual budget to show live (well, mostly live) athletics. The BBC’s annual sports spend is barely $500 million.

Wakeling says his division will be ready by August to show his subscribers all the eyeball-winning English Premiership soccer in HDTV. BSkyB CEO James Murdoch has already promised a full portfolio of premium high-def channels will be on air in 2006.

This snapshot more or less reflects a dramatic upswing in satellite pay TV over the past two years. The past uncertainties in most major markets have been resolved.

Italy’s rival platforms have merged into Sky Italia, and a rapid rise to 2.7 million soccer-mad subs. It’s the same in Spain (Digital+), and Germany’s Premiere is fast finding profits after the Kirch debacle.

Of the major markets, only France remains firmly unconsolidated, with Vivendi’s Canalsatellite still slugging it out with TF1’s Television Par Satellite.

But it is BSkyB that’s instructing Europe in a master class on pay TV. It now has 7.3 million direct-to-home subs, plus an additional 4 million viewing on cable. Murdoch is eyeing a target of 10 million DTH homes by 2010.

In August, he told analysts that he saw absolutely no reason why the U.K. wouldn’t over time match America’s typical over-80% pay TV subscriber structure. But the market — despite Murdoch reporting record profits for the year ($1.1 billion) — didn’t care for the message, and wiped a massive 20% ($4 billion) from BSkyB’s market cap, fearing that Murdoch’s plans mean more belt-tightening for investors.

Murdoch’s predicted 10 million target translates into some 400,000 new subs a year over the next six years. To get there, BSkyB is depending on much more than sport.

Dawn Airey of Sky Networks is committed to revitalizing its flagship Sky One brand (year-on-year ratings down 11%) with fresh imports such as HBO’s ‘Deadwood’ as well as “24,” “Nip/Tuck” and “Las Vegas” featuring in the winter schedules.

Out has gone Sky’s titillating latenight diet of adult TV in the shape of “Vivid XXX” and clip show “Kirsty’s Home Videos.” Airey is putting serious cash behind U.K.-made teen chiller “Hex” (from Liz Murdoch’s Shine shingle and co-produced with Sony) for airing this fall.

Sky One’s overall aim, says channel boss James Baker, is to be more like HBO although spending more on less.

In France, there’s an on-going battle between Canalsatellite and TPS. Canalsatellite is the numerical winner, with some 2.8 million subs, adding 80,000 in the half-year to June (and 4.9 million when Canal Plus’ terrestrial-only subs are tabbed).

The gentle growth — and some severe belt-tightening from chairman Bertrand Meheut — helped propel Canal Plus Group overall into the best financial position it’s been in for three years. Meheut has added around 10 niche channels, including a French-language version of Discovery, to the bouquet.

But there’s a very dark cloud on the horizon, again concerning local soccer.

Rival TPS says it wants exclusive rights to France’s top soccer league beginning in 2005. Bidding starts in October, and TF1/TPS boss Patrick Le Lay, overseeing 1.2 million subs, says he wants to grow his bouquet more than simply lift profits.

Le Lay is upping programming spend by 4%-5% this year and next. Also, TPS has beat Canal Plus to the high-def punch, promising HD transmissions next year on its TPS Star sat channel. As if to once-again dampen down the inevitable rumors of merger between Canal and TPS, Le Lay firmly told analysts that the marriage was out of the question.

Rupert Murdoch is concentrating his mainland Europe activity on Sky Italia, which recently reported 2.7 million subs, 80,000 added in just five weeks at the start of the soccer season.

Sky Italia (80% owned by News Corp.) expects to achieve operational break-even a year from now, with operating income rising in the mid- to high-teen percentage range. According to Murdoch: “Our hope is that Sky Italia will develop in a similar fashion to BSkyB.”

But Silvio Berlusconi’s Mediaset is spending heavily on soccer (buying up the pay-per-view rights for cable and digital terrestrial), covering key teams such as Juventus and Milan. It also wants to add solo rights to “Big Brother 5.”

Germany’s Premiere World bouquet is in a much-healthier position this year, reaching its long-awaited financial break-even in Q2 2004.

Premiere’s chairman Georg Kofler says he still expects to reach a double-digit profit for the full year. Kofler, on June 30, reported a 100,000 drop in subs, not helped by a controversial price raise in April. Current subs are at 2.9 million and Kofler is confident of hitting 3 million-plus by year’s end. Company is mulling a stock market float next year.

While Premiere’s all-digital diet of movies, soccer and thematic channels is comprehensive enough, there’s no major investment in homegrown content. This may be a problem, as Germany’s cable ops are spending heavily to convert their analog circuits to digital, directly challenging Premiere’s portfolio of digital choices.

Spain’s latest results from Sogecable show it has some 2.1 million subs, of which 1.6 million view the merged Digital+; the remaining 500,000 watch terrestrially distributed Canal+.

Sogecable notes that its premium options, strengthened by the addition of the Playboy Channel in the first half of this year, continue to do well with around 300,000 subs.