BUSINESSWEEK ONLINE : FEBRUARY 19, 2001 ISSUE
BUSINESSWEEK E.BIZ -- EUROPEAN COVER STORY ONLINE EXTRA: Q&A: BSkyB's Tony Ball: "We Will Compete with the PC Screen The CEO talks about the broadcaster's rollout of I-TV services and how they could create a TV portal to rival AOL and Yahoo! Tony Ball is the CEO of Europe's fastest growing digital-TV powerhouse, Britain's British Sky Broadcasting (BSkyB). In the past year-and-a-half, it has doubled its digital subscribers -- and rolled out some of the most innovative interactive services anywhere. Now, Ball has a chance to leverage this experience, first by using the 22% stake his company owns in Germany's pay-TV outfit Premiere to move onto the Continent. Ball became BSkyB's CEO in June, 1999. He was the first Briton to run BSkyB -- which is 40%-owned by Rupert Murdoch's News Corp. Before he took over, American Mark Booth had served as chief executive. Born in 1955 in London, Ball started his career as a broadcast engineer at Thames Television and first worked for BSkyB in its sports department. He has also spent time in the U.S. as president and chief executive of Fox/Liberty Networks, where he is credited with building up the Fox Sports Net cable network into a serious rival to Disney's ESPN. Ball spoke with BusinessWeek's William Echikson. Edited excerpts from their conversation follow: Q: How is the digital rollout proceeding? A: Fantastically. In the past year, we have gone from 3.5 million subscribers to some 5 million now. Digital has been the driver. It is an outstanding product that offers viewers much more choice and interactivity. The best thing about digital is that it offers so many more channels and so many more things for viewers to do -- e-mail, e-commerce. It's just a much more friendly way to navigate through TV. Last June, we changed our marketing strategy and started giving away the set-top box. That was a powerful marketing tool. Now we are noticing less churn. In the past, about 20% of our subscribers left after the life of their subscription. With digital, our figure is only half of that -- because digital is such a better product. Q: What about the spending of digital subscribers? Is it higher than analog ones? A: Yes. Digital subscribers are heavy users. The average revenue per subscriber in digital is certainly higher than analog. We are currently at the £300 mark per subscriber. With digital, we will be more than £400. We are getting our payback from giving away the set-top boxes in less than a year. A lot is being driven by additional services -- e-mail, game service, online betting. And it will get even better when we can offer video on demand and more information. The new set-top box will allow us to offer these services, because they will have big hard disks that can store lots of video and information. You soon will be able to check your utility payments over the television. All these things add up to more revenue. Q: Do you hope to create an online portal rivaling Yahoo! or AOL? A: In the television space, I guess we do. Ultimately, our electronic program guide will become a portal. It will be personalized. It will switch on with the TV and will offer a customized program guide. It will also customize stock quotes and sports information and all sorts of things. We will definitely be in competition with Yahoo and AOL. We will compete with the PC screen. Q: Do you think the television will replace the PC? A: No, I don't think the PC will go away. But to get to a real mass audience, you will need the TV. It is a trusted device. But the PC will always have more functionality. You will not work on a spreadsheet on the television. The PC is close up, sit forward. The TV is more sit back. But the TV will be better for simple tasks, such as sending a quick e-mail or checking your bank account. It is simpler than the PC, and it will be the way most people do e-commerce. Q: Why then has interactive TV not worked well in the U.S.? A: In the U.S., PC penetration is much higher than in Europe, and there are free local calls which drive Internet penetration. Here, you don't get free local calls. Also, American cable operators haven't had the same incentives as us to expand services. But this will change over time. Q: Do you see problems for your competition in cable and telecoms, with the debt and stock market crunch? A: All the fluff is being taken out of the market. There was so much [excitement] last year about DSL and other broadband telephone services. But it hasn't gone as fast as expected. There has been a problem getting access to the local telephone loop. There has been some cynicism about whether all the capital expended will result in profits. There has definitely been a shift away from optimism. Q: Is this capital shortage affecting you? A: For us, the market perception is different. We have a large installed base. Satellite delivery is reliable and easy to install. Our return path is by regular telephone, and the speed of this return path is satisfactory. Most of the broadband stuff can be downloaded over satellite. We don't need broadband as the return. Q: Are you going to offer full Internet service? A: Not for now. We spend a lot to acquire our customers. We want to keep our relationship with the customer and not launch them off onto the Internet. After all, most AOL customers stay within the AOL service. In addition, most regular Web pages don't format well onto television. So if you want to do serious browsing, you probably still have to go to your PC. WebTV didn't take off in the U.S., after all. All this said, if our subscribers clamored for Internet service, we will offer it to them. I am not ruling anything out. Q: What do you customers do interactively on the television? A: We have a lot more interactive experiences than anybody in the U.S. Our customers have access to e-mail, and we have 1.5 million registrants. All of our customers have access to telephone inquires, online shops, and other things. In the U.S., DirecTV is only talking about launching such services. We have 18 months' advance on them. And we are going to get further ahead with our new set-top box, which has a TiVo-type of hard disk that can record 35 hours of video. The box is ready now, and we are preparing the marketing. It will be probably launched in this year's second quarter. We won't give this away free. It will be sold as a premium product. Q: Will you be able to leverage BSkyB's experience outside of Britain -- for example, in Germany, where you own 22% of Leo Kirch's Premiere? A: We own 22% of Kirch's Premiere, and that gives us a great opportunity. So far, however, Kirch has suffered from slow sales. It has been disappointing. There are a lot of things to improve there. I think he made some important management changes recently to focus on sorting things out. Germany is a fantastic opportunity. There is satellite penetration of about 10 million people, albeit "free-to-air": The trick now is to get them to pay for television. Germany has a different television culture. People aren't used to paying for television, like they have become here in Britain. Historically, TV has been free in Germany. Kirch has a good platform. After the consolidation of other pay-TV operators, it's the only one left in the market. The trick now is to generate excitement, like we have done here in England for BSkyB's new services. You will see similar efforts in Germany. Kirch already has the main movie studios. We have shown in Britain when you add new services, new digital services, it makes all the difference. Q: And what about in the States? Rupert Murdoch is said to be ready to take over DirecTV... A: I can't tell you anything more about that than what has been in the papers. But so far, the Americans haven't really found the path to give the consumer what he wants. It is a hard slog. But we don't count the Americans out in this field. Remember, Microsoft is getting into this market, and they are not a company you write off. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Europe's I-TV Advantage (int'l edition) TABLE: I Want My I-TV (int'l edition) ONLINE EXTRA: Q&A: BSkyB's Tony Ball: "We Will Compete with the PC Screen ONLINE EXTRA: Q&A: CanalSatellite's Bruno Delecour: "Our Digital Customers Spend Much More" I-TV's Software Upstart (int'l edition) ONLINE EXTRA: Q&A: Andre Kudelski: "Our Independence Is Our Strongest Force" Surfing by Boob Tube (int'l edition) ONLINE EXTRA: Q&A: Netgem's Joseph Haddad: "The TV Is a Simple Multimedia Device" INTERACT E-Mail to Business Week Online

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