Sky taps new profit stream

Urbane, relaxed and charming are words that sit easily with Barry Norman but not with Sky. However, that is where the film critic announced he was moving to last week after 26 years as the nation’s arbiter of film taste at the BBC. His decision is symptomatic of the shift happening at Sky TV as the satellite station grows beyond simply a sports and movie network.

The Norman conquest and accompanying strategy has been spearheaded by Sky chief executive officer Mark Booth, who joined the company last November. He was previously chief operating officer at News International’s Japanese joint venture satellite station JSkyB. Director of programming and general manager of broadcasting Elisabeth Murdoch shares this view and has launched a search for home-grown talent.

Booth has said: “Two-thirds of Sky viewing is for news, documentaries, music or entertainment. To non-subscribers, the value of this programming is often unrecognised.”

In January, Sky signed a deal to develop a number of shows with Chris Evans’ production company Ginger Productions. It has similar deals with a number of other production and film houses to explore making new material exclusively.

The strategic shift comes not because Sky has a new-found commitment to the arts and original programming, but because the network is trying to add an elusive third strand to its programming that will push ratings and revenue.

Since Sky was launched in 1990, it has attracted 2.5 million subscribers. They have been attracted by its twin policy of buying the exclusive rights to show sports, primarily Premier League football, and airing movies before they are shown on terrestrial TV.

However, sport and movies are beginning to lose their driving force in cable. At the start of 1997, cable penetration for the industry as a whole ran at 0.5 per cent a month, which represented 110,000 new customers. That figure has dropped to 0.1 per cent a month, which translates as 24,000 new subscribers, according to BARB figures.

As Richard Dale, analyst at Salomon Smith Barney, says: “Booth has obviously asked himself why 75 per cent of the UK population do not have cable or satellite. The reason is that these people are not interested in sports and movies, or at least not at the price they are currently pegged at. He is now looking at more general types of programming to push volume growth.”

This is certainly the consensus inside the industry. TV director at Mediacom Mark Brown says: “The market penetration point for sports and movies seems to have reached saturation. And the cost of football – which is Sky’s real driver – and movies are at a premium and will only get higher.”

However, developing original programming is undiscovered territory for Sky. As one industry observer put it: “Every decent station has shows which sum up the station as a whole. When you think of Sky, it’s Premier League football or perhaps the Simpsons. And neither of these are what we traditionally call original programming. The aim for the commissioners at Sky One, which will lead this drive, is to get the channel talked about in the pub. People like to watch things that are produced at home.”

Sky’s commissioners will face a tough task. Those inside the TV industry estimate Sky’s budget for original productions and co-productions to be 20m a year. This compares with, say, Channel 5’s at 110m, or ITV’s at 800m.

Additionally, Sky has no track record in original production, while its terrestrial rivals have decades of experience to draw on. Western International TV buyer Colm Feeney says: “Sky is good at scheduling but commissioning involves more risk. It’s quite easy to buy a US hit and show it on your channel. But it is very difficult to look at a piece of paper and determine whether this will be a hit film or TV show.”

However, Sky has had early success. Last July’s Ibiza Uncovered looked at mating and drinking habits of young Brits abroad. It attracted 1 million viewers, which is what Sky gets for many of its Premier League games. This was followed by shows that looked at the same thing in the Caribbean and Australia. The station also produced Dream Team, a teenage soap opera set around a football team.

And at the end of this month Sky One will air Bloody Foreigners, which the station describes as “a tongue-in-cheek look at how people from other countries see one another”.

Sky seems to be setting up its stall as a maker of cheap and cheerful TV. Observers estimate the Uncovered series cost about 10,000 an hour to make, while prime time shows like Cracker on ITV comes in at 500,000 an hour.

These programmes have further value, because Sky can then begin to amass a library which it will sell on to other broadcasters around the world.

If they work, News International will make available more funds for original production. This needs to happen if Sky is to be taken seriously in this area. In the long term the channel’s success will depend on it being able to make, rather than buy in, the sort of programmes that people talk about in the pub the next day. Sky’s critics call it acquisitive and formulaic, but good ideas tend to defy categorisation.

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