BSkyB’s advertising arrangements face upheaval following news the satellite giant is in talks with WPP Group and outside agencies over its £75m flagship account (MW last week). Relations have soured with incumbent United, part of the WPP stable, and Sir Martin Sorrell is said to be making last-ditch attempts to keep the account, while Clemmow Hornby Inge (CHI) and WCRS are known to have been contacted by Sky marketing chiefs.
The £75m account would be the jewel in many an agency’s crown, but the might of the Murdochs, their company’s “arrogant” view of outsiders and its long list of demands make it less so, say some.
BSkyB, which is more than a third owned by Rupert Murdoch’s News Corporation, has cast a shadow over UK broadcasting even before its inception in 1990; its aggressive marketing and mighty cheque book are legendary.
One analyst says: “You would never bet against Sky. However the media market fragments and convergence occurs, one certainty is that Sky will be there fighting.”
BSkyB started life as Sky Television in 1989. Murdoch’s business and rival British Satellite Broadcasting (BSB) struggled with huge losses and when BSB collapsed in November 1990, Sky Television merged with it, becoming British Sky Broadcasting (BSkyB) and marketed as Sky. BSB had proved no match for Sky’s shrewd, aggressive marketing and pragmatic capital expenditure – qualities that would become the bedrock of future success.
The analyst says Sky’s purchase of Premiership football rights and other premium sporting events has been at the heart of its appeal. Murdoch himself has described sport as a “battering ram” for pay-TV, providing a strong and loyal customer base. That looks set to continue. Irish broadcaster Setanta Sports picked up two of six packages for the 2007/2008 Premiership season onwards, but Sky bought the remaining four for £1.3bn, effectively pricing the rest out of the market.
Sky has prospered from a dearth of competition in the UK – rivals consistently failed to dent Sky’s popularity – while ad revenues, too, have remained strong in a gloomy market: up 4% against an estimated decline of 0.2% in the UK, says a spokeswoman. But it is subscription revenues that remain more important and last November chief executive James Murdoch admitted customer churn was above targets, although he says it is on track to reach 10 million customers by the end of 2010. Added to this has been Sky’s venture in to the “free” broadband arena in July, already populated by major players such as Orange and Talk Talk.
The move worried analysts concerned by the “massive” outlay of around £650m over three years. It also faces renewed threats from a national operator in the guise of NTL:Telewest, free-to-air package Freeview and “converged” services from the likes of BT, which launches its Vision package later this year. However, the fact that Freeview is expected to overtake Sky in numbers early next year, is offset to a certain degree, according to an insider, due to Sky’s place as an equal member of the consortium that owns and markets Freeview.
While there may be new competition, others point to Sky’s continuing acquisition strategy on all fronts. It bought broadband internet service provider Easynet in October 2005 for £211m, enabling it to offer broadband services, some of which it launched earlier this year, as well as online networking site Mykindaplace.com. Last week it snapped up the rights to series three and four of cult drama Lost from Channel 4, paying many millions more for the privilege. Meanwhile, Sky HD was the first nationwide high-definition service to launch – in May this year.
Its strong brand and business savvy mean Sky will continue to succeed, even as media businesses face increased digital onslaughts, says one agency executive. He adds: “Most businesses have strength in either platform or in content, but Sky is rare in that it has strength in both.” He says its philosophy of “personalised entertainment”, which has been at the forefront of advertising for its Sky Plus personal video recorder, will continue to be key. “It pioneered the message of entertainment ‘your way’,” he says. “Now it will – and must – make that a multi-platform proposition.”
Meanwhile, its clandestine hunt for a new agency should put few off, he reveals. “I don’t think Sky is arrogant. It has a very complex relationship with its agencies, but that is more about processes than Sky wanting to be difficult,” says the agency source.
It seems inevitable that Sky will remain a love-it-or-loathe-it brand, but equally so that it will survive any shake-up of the media landscape for years to come.
Facts and figures
• Sky Television launches a UK service in 1989, and by 1990 it has 1 million subscribers. In November that year it merged with BSB
• BSkyB signs exclusive live TV rights deal with the FA Premier League in 1992
• Its subscribers reach 5 million in 2001. The analogue service is discontinued and Sky Plus is introduced
• BSkyB takes an equal share in Freeview in 2002
• Rupert Murdoch’s son James is elected as chief executive in 2003, replacing Tony Ball
• Sky launched Sky by Broadband and high definition service Sky HD and Sky Broadband in 2005
• For the year to June 30 2006 BSkyB had a turnover of £4.1bn and made a profit of £798m before tax.