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- The Guardian,
- Thursday May 10 2001
BSkyB, the satellite television broadcaster, yesterday announced plans to cut 300 jobs against a backdrop of spiralling losses which reached £365m during the first nine months of the company's financial year.
The majority of the redundancies will come from the integration of Open, the loss-making interactive television service, into the mainstream Sky operation. A spokesman for the company said there would also be some cuts across other parts of the Sky empire, although he declined to say where the axe would fall.
Sky has sunk into the red due to the cost of converting customers to its digital service, which has been driven by a giveaway of the set-top boxes needed to receive the signal. The cost of acquiring movie and sports rights has also soared and the company is shouldering losses from a joint venture with the German media mogul Leo Kirch.
The company, in which Rupert Murdoch's News Corporation has a 37.5% stake, also ploughed cash into a series of internet start-ups at the height of the boom which have proven to be a poor investment. John Swingewood, Sky's director of new media, is leaving the company.
The loss figure, which includes £189m of one-off costs, compares with a loss of £90m for the same period in the previous year.
There was further bad news for Mr Murdoch when News Corp warned that profits this year were likely to be $100m (£71m) lower than previous forecasts due chiefly to poor box office receipts for some of its movies.
Open offers a range of interactive retail, banking, travel and games services on the Sky Digital platform but has struggled to make money. In the first nine months of the year, Open lost £48m, shaking confidence in the industry that the TV will replace the PC as the means for online home shopping.
The integration of Open into Sky Interactive was made possible after BSkyB bought out two of its partners in the business to gain control.
The central London offices which house Open's 420 staff are to be closed. The business will be integrated with Sky Interactive, which employs 200 people at the company's headquarters in the cheaper location of Osterley in west London. The combined division, which will see staff numbers cut virtually in half, will save £20m a year, although the restructuring will result in a one-off charge of £40m.
Sky has staked its future on the development of revenues from interactive services such as programme-related retail and online betting. Subscribers to the company's multi-channel TV service pay an average of £289 a year but the company says that figure needs to reach £400 by 2005.
While it was still a minority shareholder in Open, BSkyB was unable to raise cash from interactive services on its broadcast channels because of a non-compete clause. It now intends to roll out services including betting tied to its sports coverage and merchandise linked to a wide range of programming, from the Simpsons to Temptation Island, all at the click of a button.
Sky faces an increasingly competitive environment from a cable industry that has consolidated into just two players and ONdigital, which is to be given the more powerful ITV branding, reflecting its ownership. Payments for the rights to key sports and imported programming have reached staggering levels. Sky is paying £1.1bn for three years of Premiership football coverage and lost Friends and ER to Channel 4's new digital channel, E4.
Shares in BSkyB yesterday fell 52p to 804p.
Sky says it has now signed 5.3m customers of which 95% are now receiving its digital service. The old analogue service will be switched off in September, three months later than originally forecast.
