BSB was quickly absorbed by Sky in merger bid, this take-over resulted in a name change to British Sky Broadcasting (BSkyB), beginning broadcasting in April 1991. The merger was a direct breach of the 1990 Broadcasting Act, which had be issued only the previous day by the new public body; ITC (Independent Television Commission) who had replaced the IBA. The ITC was developed to regulate commercially funded television services in the UK, (this included satellite services), they had to ensure quality broadcasting, and a variety of television services were available across the country, as well as producing a code of governing broadcasting standards. The BSkyB merger had happened without consultation of the ITC, who were rendered powerless ‘to prevent or influence the union of Sky and BSB’ Crisell (2002), and unable ‘to limit concentration of ownership’ Franklin (1997) this was due to the fact that satellite TV was a transnational business, spreading across national borders which allowed operators to ignore restrictions laid out by some countries. Another factor which gave Sky power to undermine the government was the knowledge that tight control measures would discourage operators from investing the huge start up costs needed. These factors have allowed Sky to used methods of maximising audiences with little government restriction or influence. The 1990 Broadcasting Act lacked specifications for regulating broadcasters and the New ITC body was to govern with a ‘lighter touch’ Franklin (1997) than the IBA all of which allowed for BSkyB’s development in the early nineties.
During the early nineties BSkyB began to start to make a profit, in 1992 Murdoch encrypted some channels so that viewers were having to pay to view certain programmes such as; Sky Sports channel events, following this the Sky network was re-launched in 1993 with a fifteen channel package that viewers could subscribe to annually. Profits started to increase rapidly and by the end of 1993 BSkyB reported that ‘the previous year’s loss of £20.4 million was transformed into a profit of £62.2 million’ Crisell (2002), and subscription prices were again increased in 1994. in 1995 BSkyB acquired the rights to 3,000 vintage episodes of Coronation St from Granada (who also had a stake in BSkyB, as they were originally part of BSB), which were to be used in launching new satellite channels; Granada Gold Plus, for instance, that showed recycled programmes, this attracted more pay to view consumers. BSkyB were also gaining consumers through buying the rights to broadcast certain events (mainly sporting events) and also movies, consumers would have to pay a surcharge to view these programmes, as no other broadcaster could show them. These factors were contributing to a reduction in the number of terrestrial channel viewers, which the main four channels were achieving.
1995 saw broadcasting technology developing further as the government began making provision for a digital broadcasting service in the UK, the Broadcasting Act 1996 was issued to set out a legislative framework for digital television services. The Act stated that there would be six original ‘multiplexes’ Franklin (1997), which would facilitate between three and six television channels each, this would result in the analogue television signal being turned into (eventually ‘switched off’) digital bytes that could transmit a much larger amount of information. The Act dictated that the ITC would have the power to licence all providers on the multiplex, existing broadcasters were guaranteed a position on a multiplex to digitally broadcast whilst still using their existing analogue services too. The BBC were awarded a whole multiplex, whilst Channel 3 and Channel 4 were given joint control of one, the Act predicted digital terrestrial services would begin in mid-1998 with eighteen to twenty-five new stations , whilst Satellite digital services would start earlier, offering around three hundred new stations.
Set up costs for the new digital services were very high as to were programme making expenses, ‘the BBC’s estimated start-up capital needed for digital investment would be £200 million, claimed John Birt’, Franklin (1997). With such high revenues the new digital services had to be funded by subscriptions or pay per view systems.
All of this allowed Murdoch to set the wheels in motion for his dominance of the digital television market, to the point of exclusion of most rivals. In 1997 BSkyB formed a major part of the British Digital Broadcasting (BDB) consortium alongside Carlton and Granada, who made a massive bid of £300 million to the ITC for a digital license. The ITC did award the license to BDB, though on the provision that BSkyB would be prevented from shareholding in the company, this was ITC’s tactic to try and weaken Murdoch’s monopoly potential within the digital service market. However this decision proved fatal, as it ultimately resulted in advantages for Murdoch, this was because Carlton and Granada had to pay BSkyB compensation for the company’s withdrawal from BDB, whilst also allowing Murdoch to keep his £300 million investment for start-up costs. The BDB, later to become ITV Digital, license depended upon being able to preview premier sports events and movies, which BSkyB was the sole supplier of, this would mean that BDB would help to extend BSkyB’s market as they provided all the premium channels in the BDB package. So though BSkyB had not had to invest in BDB it was still acquiring a high share of the company’s revenue, whilst being able to promote their own satellite digital channels.
If all of this wasn’t enough BSkyB had also formed the British Interactive Broadcasting company, aiming to broaden satellite services into both TV channels and interactive channels, that audiences could use via a phone line. This company was branded ‘Sky Digital’, and was launched on 1st October 1998, six week’s before the government’s launch of the BDB, learning from his head start success over BSB, Murdoch again scooped the momentum from his main competitor, from which they could never really recover. Murdoch was in an advantageous position to do this as he already had digital systems in place, he launched a decoder for both satellite and terrestrial signals before the terrestrial broadcasters, he also had the financial backing of his media empire and could even afford to subsidise set up costs by giving Sky Digital subscribers the digiboxes free of charge. Though the latter method cost Sky Digital over £500 million in its first year of existence, it would prove to be ‘the crucial advantage, for it was highly unlikely that the British market would accept two separate boxes for the satellite and terrestrial services’ Porter (1996). BSkyB was also able to convert all of there subscribers to the new technology and was able to switch off its analogue signal in 2001, an issue that still plagues the governments’ digital service, as the public are reluctant to ‘switch off’.
Murdoch has ‘become the gatekeeper of access to the new television technology’ Franklin (1997), the BBC and Granada signed up to be among the services offered by Murdoch’s satellite system, which resulted in their programming being vulnerable to Murdoch’s control and ‘market-driven assessments of suitability’ Franklin (1997). This also discourages the BBC and Granada from establishing their own independent terrestrial service that would be in competition with Murdoch, as they won’t feel a need to embark on the financial difficulties. The 1996 Broadcasting Act again (like the 1990 version) seemed to be powerless against Murdoch’s dominance of the gateway to fair digital television competition, Murdoch just holds too much power, even the Office of Fair Trading has seemed reluctant to exert much control over the Sky Digital empire.
By 2001 Sky Digital were attracting subscribers at a rate in accordance with their 2003 seven million goal, and BSkyB was still the major satellite broadcaster in the UK. ITV Digital (formerly BDB) was on the verge of collapse, the company ultimately liquidated in 2002, the main reasons for failure of ITV Digital was a lack of technical ability (as not all of the UK could be serviced by the company) that hampered the company’s ability to maximise their already waning customer base, that was slow to grow in recruitment numbers, and had a negative ‘churn’ rate of subscribers. Other reasons for ITV Digital’s demise was it’s inability to compete with Murdoch and Sky Digital, the latter service was able to offer the consumer what they wanted (such as sporting events, movies etc…) and they had the financial stability to give subscribers free incentives, something that ITV Digital were never in a position to do.
