Will Sky be the limit for Five’s double act?

It is no surprise that BSkyB’s advertising sales chief, Nick Milligan, has turned to former colleague Viacom Brand Solutions (VBS) boss Paul Curtis to help kick the satellite broadcaster’s sales operation into shape (MW last week).

The two started their sales careers together at TVS, with Milligan later taking Curtis with him to help launch sales operations at UK Gold and later Channel 5 (now Five). When Milligan left Five, where he was deputy chief executive, earlier this year to join Sky Media as managing director, there was speculation – since proved to be true – that sales director Mark Chippendale would leave and that Milligan would again call on the services of his former colleague.

The two recruits appear to have their work cut out. Sky Media is experiencing trading difficulties and could end the year owing some agencies millions of pounds. The problems stem from overtrading and a failure to deliver promised audiences to some agencies. The situation has been exacerbated by the poor performance of Sky One, under fire from a host of new entertainment channels, and where adult impacts are down 7.9 per cent for the year to October 2004.

The forthcoming negotiation season could prove to be a tricky one for Sky Media. It will be left to Sky Media head of agency sales Richard Hawking to do the leg work as Curtis will not arrive at Sky until next year. He will, no doubt, make the most of a recent improvement for Sky One’s adult impacts: they increased 3.3 per cent year on year for the period from the start of the new autumn schedule on September 21 to October 14. The autumn schedule includes new shows such as The Match, Hex and Deadwood.

Sky Media, which also sells airtime for BSkyB’s partner channels such as the History Channel, and third-party channels such as Discovery and Hallmark, has in the past managed to increase the amount of advertising revenue coming to the satellite broadcaster. For the year ending June 2004, advertising revenues rose ten per cent to &£312m compared with the same period last year. Sky claims it is growing more than twice as fast as the TV market as a whole, with adult impacts for the period January 1 to October 14 up 7.2 per cent compared to a rise of 3.3 per cent for all broadcasting and a fall of 0.3 per cent for terrestrial channels.

The majority of BSkyB’s income derives from subscribers to its digital satellite pay-TV service, of which there are 7.8 million. But the broadcaster is having to redouble its efforts to boost subscriber growth, which has slowed following the launch of Freeview. It has increased its advertising spend to &£75m, is overhauling its subscription packages, is investing in new programmes for Sky One (such as Deadwood), and is launching new services such as high-definition TV and a free-to-air satellite service.

One of its key new products is Sky Plus, a personal video recorder (PVR) that, along with other “new devices could soon put paid to the way in which commercial content has been funded for these past 50 years,” according to Dawn Airey, Sky Networks managing director, when she spoke last week at a Royal Television Society dinner.

Sky is market leader in the PVR market. Its Sky Plus product is in 400,000 homes, and the company has a target of 2.5 million households by 2010. It is also preparing an upgrade to Sky Plus 160.

Airey added: “Today, the loss of commercial impacts because of PVRs is less than one per cent. However, we have to plan for the future. Nick Milligan’s team are already engaging agencies and creatives about how they can make better use of airtime in an age when everybody can skip past the ads.”

Buzzwords on BSkyB’s lips when they talk to advertisers already include “bespoke solutions”, “partnerships” and “sponsorships”. One expert says: “Sky is best placed to understand the technology and how to use it to the advertisers’ advantage.”

She adds that commercial terrestrial channels which are, unlike BSkyB, primarily dependent on advertising revenue would be most affected, not only by PVRs but the changing face of broadcasting and the arrival of broadband.

She referred to forecasts from Zenith Optimedia showing that over the next four to five years the rate of growth of television advertising revenue will decline from about six per cent, which is where it stands today, to four to five per cent in 2007.

Fortunately for BSkyB, advertising revenue only makes up nine per cent of turnover for the satellite broadcaster. But a BSkyB spokesman says that advertising revenue, when seen in the context of an operating profit of &£600m, assumes greater importance. He adds: “Any growth we can achieve in ad revenues can make a significant contribution to the bottom line.”

That is why Milligan has called on what he sees as a safe pair of hands to help him continue boosting advertising revenue. One of the key tools that Sky Media is planning to use to win over advertisers is the Sky View panel – made up of 20,000 satellite homes, many of which are part of TNS consumer research panels – to provide data on TV viewing and buying behaviour. The results from the research initiative, which was started by Chippendale, will be presented to agencies when they become available early next year.

Chippendale has also been credited with getting rid of “a lot of old-style working practices” and managing the 240-strong sales department well, leading some to question why BSkyB has gone to the trouble of appointing two senior sales executives.

But it is no secret that Airey, who is ultimately responsible for sales was keen to have someone she could trust, and she has worked with Milligan at Five where she was chief executive. However, it is not so clear why Curtis chose to give up his sales role at VBS to take up a number two position as deputy managing director of Sky Media. Renumeration will no doubt have played a part, but there is a whisper he did not see eye to eye with MTV Networks UK managing director Michiel Bakker.

Milligan and Curtis are regarded as a strong, complementary pair, with the former an effective frontman and the latter strong on blue-sky thinking, operations, internal systems and trading mechanics. One commentator says: “Paul’s got better at going out and presenting, but Milligan is only bettered by Peter Mandelson for self-publicity.” Another adds: “Curtis knows how to trade and how to innovate.”

VBS colleague Nick Bampton, now acting managing director, says of his former boss Curtis: “He creates the right environment for the staff to go out and make the deals.”

One senior agency executive says that Curtis must use his appointment “to create a new sales policy, which is something Sky Media needs. It is carrying a lot of debt and owes advertisers a lot of money.”

Of course, going into negotiations, the agencies will talk tough, and there is no doubt Milligan is in for a bruising in the next few weeks. But he will surely breathe easier when Curtis is in place.