Sky Television vs British Satellite Broadcasting: Analysis of actions of the two companies

Essay by mango76University, Master'sA, April 2004

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By October 1990, two newcomers, British Satellite Broadcasting (BSB) and Sky Television, rivaled one another in an ugly battle to dominate British satellite television. In pursuit of a better market position, not only did both players invest a combined total of �25 billion, but also racked up losses at the combined rate of nearly � million per week. Rather than rationalizing and engaging in cooperative behavior to increase profits for the overall industry, this battle became the war of attrition, ultimately leaving only one player to survive in the long run.

With �0 million of start-up costs and breakeven anticipation in 1993, BSB built a franchise, secured �2.5 million of 1st round financing, recruited personnel, and stirred public interest of its new technology, DMAC. Sky TV comes along with only �0 million of start-up costs and breakeven anticipation in early 1992 to launch its own satellite television venture. As a private consortium, offering 16 channels with strong "footprint" throughout Europe, disregarding BSB's DMAC technology as "nonsense", Sky planned to install 1 million satellite dishes.

A war soon followed. BSB retaliated by using its 25-cm "Squarial" satellite dish as a branding strategy, which was only a "dummy" at the time, and engaged in negative advertising about Sky. While BSB's objective was to accelerate sales through increased advertising and promotion levels, it actually ended up emptying its deep pockets (�0 million) for rights to Hollywood films. Sky responded back by offering a "free film" channel, engaged in negative publicity by branding BSB as "hot air", became committed to a bidding war for Hollywood programming, relaxed its terms for its customers to include "two-week free trial, with no deposit", and initiated a direct selling effort. These actions combined with slow dish sales resulted in emptying Sky's pockets by over �0 million.