Sky shares skyrocket on online strategy

Murdoch's TV giant focuses on Internet with £250m investment, mobile content, sports deals
Written by Matthew Broersma, Contributor

British Sky Broadcasting (quote: BSY) shares soared nearly 300 points after it announced its plan to sink £250m into the Internet and pursue ADSL and mobile-phone deals.

BSkyB shares closed at 1,910p, up 299.5 on the London exchange.

Sky became the latest traditional media company to affirm the appeal of e-commerce and Internet-connected mobile phones Wednesday, earmarking £250m for expanding its Web presence and launching a flurry of new-media announcements.

Particularly in the spotlight with Sky's announcement are mobile e-commerce (or m-commerce) and the growing online sports market, which industry observers say is becoming a focussing point for old and new media. "We have today announced a major investment in Sky New Media Ventures to develop sky.com to enhance the presence of the Sky brand and content in the new media field, with the objective of skysports.com becoming the number one sports portal, reflecting the reputation Sky Sports has achieved in sports broadcasting," said BSkyB CEO Tony Ball in a prepared statement.

BSkyB said the £250m for Sky New Media, its online division, will go to bulk up its sky.com and skysports.com properties, with a focus on grabbing online-sports market share. Other announcements:

  • Sky is moving to target mobile phone users, and has nearly reached an agreement with BT Cellnet to provide news, sports updates and other content for subscribers to BT's Genie Internet online service. The content will be available via SMS, WAP and GPRS.

  • Digital television subscribers have jumped to 2.6 million.
  • A joint venture with telco Kingston Communications for an ADSL service in Kingston's East Yorkshire area. The venture, half-owned by both partners, will offer a range of entertainment and multimedia services including digital television, true video on demand, high speed Internet access, email and local information.
  • Sky has purchased stakes in three Internet companies, sports site Sportal, e-tailer Streets Online, and Static, which designs interactive TV services, as part of its drive to build up its online brands.
  • Sky will launch an online sports shop, its first standalone e-commerce venture, which it will promote to its TV subscribers.
  • "This is significant in that it shows there's power being built up for e-commerce and interactive services through the cable and satellite distribution channels," said Scott Smith, director of Internet strategy with Yankee Group. He said that while Sky has been fairly slow in jumping into the Internet, it has the potential to leverage its substantial television brand, along with its extensive media connections through parent company News Corp., to make a big impression online.

    Sport is particularly important to the Sky strategy as an appealing property on which to focus its various on and off-line properties. Sky TV has already become well-known for its sports focus -- even attempting to buy Manchester United outright recently -- and the company is hoping it can create a similarly powerful online brand with skysports.com.

    Sport is more powerful as a media property in Europe than elsewhere, according to observers, partly because it has less media competition here. Several entrepreneurs have turned this reality into big money, including 365 Corp., operator of Football365 and other sports sites, which recently launched a public stock offering. "Many Web companies are making a substantial business out of (sport) right now," said analyst Smith. "The speed of (365's) growth attests to the strength of its market here... (Sport) is the point around which different broadcast platforms are converging."

    Digital subscribers increased 796,000 in the three months to end December compared with 531,000 in the previous quarter, with a total of 700,000 new subscribers in the first half, bringing its total overall subscriber base to 8.404 million.

    BSkyB said its operating profit in the six month period fell to 27.8 million pounds from 107 million pounds in the same period the previous year, largely due to costs of 822 million pounds as the company installed and invested new subscribers.

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