Report: Bsb vs Sky Television

1255 WordsApr 26, 20096 Pages
1. 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…show more content…
Merger NPV= Sky NPV + BSB Revenues NPV = 2532 £ M + 9653 £ M = 12223 £ MTherefore, the minimum percentage of the pie that we would accept as BSB is 7,14%. Obviously, this would be private information, and in a possible negotiation BSB should put on the table a much higher value than its walk away percentage agreement. 4. Instead of being rational and engaging in cooperative behaviour to increase profits for the overall industry, the battle between BSB and Sky became a war of attrition, in the end leaving only one player to survive in the long run. We can refer some reasons why this battle became so costly. First, following Sky’s decision to enter the market, both companies engaged in major battle for film rights and other programming. Both BSB and Sky paid a premium as high as 3 times the average for the exclusive rights to programming. These costs became sunk for both the firms and were strong commitments signalling that the companies were devoted to stay in the business for the long run. Second, the promotion and advertising levels were above the optimal to fight against each other and not to increase the market size. Moreover, BSB and Sky invested $800M and $400M respectively to launch their services and to continue operating they had to line up further re-financing. BSB was signalling that they had confidence in their technology and ability to

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