Essays British Satellite Broadcasting Versus Sky Television

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Report: British Satellite Broadcasting Vs Sky Television

BSB should have been able to identify potential competitors, particularly News Corporation. News Corporation was successful in US (in the US TV satellite industry), had experience transmitting television programs to Western Europe with a low-powered satellite and they already had presence in the UK with newspapers, which could allowed Sky to realize economies of scope. These economies of scope are even more significant if we take into account that News Corporation owns 20th Century Fox Studios. After purchasing 69% interests in SATV and renaming it to Sky Channel, this was a clear signal of a potential competitor to BSB. Adding to this, other signal was Murdoch’s personality, characterized by being aggressive and used to risk and make big bets. After all, he had bid against BSB to the British DBS franchise and lost, and given his personality, it’s normal that he would not go away after the first round. News Corporation is a global company and UK is one of the wealthier nations in the world, with high potential advertising revenue, which would make Murdoch want to be the leading player.

BSB made another mistake when they focused more on technology and not on customers and costumer needs. Data doesn’t give significant information that costumers wanted higher quality TV (comparing to existent BBC or ITV for instance) as BSB assumed, and therefore thought that having the 15-year franchise of the high-powered DBS channels, the other medium and low-powered were not a concern. Nevertheless, competitors had the capability to overcome the entry barriers. This could be made for example with Astra that would launch medium powered satellite in 1988, and so, before BSB planned to start broadcasting. With medium-powered satellites, Sky could get around the license requirement and they could have a partnership with Amstrad (that left BSB) to supply the satellite dishes. The technologies to launch the services were available and the Sky service could still be launched before BSB. Risks were high for BSB and they should have taken into account that competitors would see that too. A company that would act fast and decisively would be a serious threat for BSB.

Before Sky’s announcement BSB should have followed a strategy to increase the cost of entry for any potential entrant. In practice, BSB could have bought exclusivity rights over Astra satellite as a new entrant could provide the same service with a medium-powered satellite. Actually, by signing this exclusivity they would have launched their services immediately (with PAL existing technology), guaranteeing a first move advantage and restricting the room for entrants. Afterwards, with the network established BSB perhaps could upgrade its technology to D-Mac (high-powered) but this time with control over market. Speed in getting to the market was crucial in this case, but BSB missed it, having technology concerns prioritized over marketing concerns. Besides, if they insisted in this technology (D-MAC)...

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