Page 1: Introduction
BSkyB will primarily be remembered as the company which changed the face of UK broadcasting, through reflecting our changing lifestyles as we move towards the 21st century. BSkyB also created a new Multi Channel television industry through new technology and innovative marketing. In under seven years, BSkyB has become a great British success story and has entered the FT100 Index as one of the top 30 companies. BSkyB is also the world’s largest and most successful satellite pay television operator.
The business sees itself as a Television Broadcaster and technology and marketing innovator. This case study concentrates on BSkyB’s new customer focused strategy, which has been developed to manage subscriptions to its satellite TV channels. Satellite television provides the opportunity for millions of viewers to receive movies, sports, entertainment and news directly to their own homes, from a variety of satellite TV channels. Satellite television provides a television service that is essentially “customer focused”. Viewers no longer have to select from the limited choice of terrestrial TV stations. They can now choose from a menu of channels and programmes, which more closely reflect their preferences and lifestyles.
In this context, we have moved towards a customised service, in which sports fanatics can enjoy nearly 200 hours of top sporting action every week. Movie fans can indulge by watching a previously undreamed of selection from classic British television movies and international movie masterpieces. Children can tune into a number of dedicated kids channels. The choice and variety is endless. In less than seven years, BSkyB has established itself as a key part in the fabric of many people’s lifestyles. Sky currently has over five and a half million subscribers in the UK and Eire and there are very few people who have not “popped around to a friend’s house” to watch a Premiership football match or a brand new blockbuster film.
The story began in 1982, when News International acquired the majority shareholding in the Pan-European Sky Channel. In June 1988, the concept of Sky Television for the UK was announced and in February 1989 Sky Television launched its DTH (UK Direct To Home) service with four channels via the Astra Satellite. These four channels were: Sky One, Sky News, Eurosport and Sky Movies. Sky Movies was the first subscription channel.
In November 1990, Sky and British Satellite Broadcasting (BSB) merged to form British Sky Broadcasting (BSkyB). However, by the end of 1992 BSkyB had accumulated operating losses of £11 million per week and it was clear that a new corporate strategy was required to turn operating loss into profit. Major programming acquisitions, were made, including exclusive live coverage of Premiership football that contributed towards the turn round of the company and the successful global floatation in 1994.
Operating profits increased significantly to £170.1 million in 1994, £245.2 million in 1995 and £315.0 million in 1996, against losses of £47.0 million in 1992. BSkyB was listed in the FT100 Index Top 30 companies and in October 1996, with the share price standing at around £7.00 from a launch of £2.56, the company was valued at £11.0 billion (up from £4.0 billion). One of the issues related to the number of people taking subscriptions for a short period and then letting them lapse. In the satellite business this is known as the “churn rate”. In June 1992, BSkyB’s annualised churn rate was 35%, which meant the company could potentially lose about half a million subscriptions per year from its subscriber base of 1.5 million households. This became a major priority for resolution.