Kate Bulkley, Media Analyst.

BSkyB wants new Hollywood deals

By Kate Bulkley

The Hollywood Reporter

Feb. 12, 2004

LONDON -- Reporting a sharp increase in profits and restoring a dividend Wednesday in his debut presentation of financial results as British Sky Broadcasting CEO, James Murdoch threw down the gauntlet to Hollywood studios, contending that DVDs "have changed the landscape" and that new studio agreements "really need to reflect this."

"We are focused on cost, and our deals with studios are something we really think we need to address," Murdoch said. "We want to have these (movie) products in a way so that we can all make money."

As he unveiled a sharp rise in BSkyB's net profit, Murdoch announced plans to resume dividend payments for the first time in five years.

The resumption of the dividend -- an interim payout of 2.75 pence per share -- serves as a "bookend" to the period of investment that started in 1999 with the rollout of BSkyB's digital television service, said Murdoch, who got the top job at the pay TV company in November amid controversy relating to questions of nepotism and whether he was capable of running a major company at age 30. His father, Rupert Murdoch, is BSkyB chairman and its biggest investor (HR 11/11).

BSkyB's aftertax profit increased significantly to 130 million ($246.1 million), up from a year-earlier 12 million. Total revenue was up 17% to 1.8 billion ($3.4 billion). The broadcaster has 7.3 million subscribers after adding 193,000 in the quarter ended in December and is "on track" to reach its 8 million subscriber target by 2005, Murdoch said.

Murdoch said the challenge for senior management going forward is: "How do we stay focused and continue the momentum?"

One area clearly getting Murdoch's attention is the cost of Hollywood movies. He said that Sky will be negotiating with a number of studios during the next 18 months with the focus being to "work on" the costs BSkyB pays for films. "The premium movie business is good, and it will continue to be good," Murdoch said. "There is clearly a relationship between all the different ways that people consume a film in the marketplace and what we pay for."

He said the question is: "How do we bring those (movie) products to people in their homes digitally so we can all make money?"

Sky Movies, with 11 channels showing films at staggered intervals, reached 5 million subscribers in November, and a relaunch of the service has boosted first-night audiences for films. "We've had more 1 million-viewer premieres in the period from November 2003-January 2004 than we had in the prior 12 months," Murdoch said, naming as examples "Star Wars: Episode II -- Attack of the Clones," "Bend It Like Beckham," "Spider-Man" and "Minority Report."

During the past 12 months, movie costs were essentially flat at 202 million ($382.4 million) as increased costs of 14 million ($26.5 million) were offset by 13 million ($24.6 million) of savings from favorable currency fluctuations with the dollar, the company said.


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