veryard projects - innovation for demanding change


veryard projects > business organization > case studies > bskyb
focus contents links
In February 2004, students following our course in Business and Organizations were required to submit an essay on the viability of BSkyB as a business operation.

BSkyB (Sky) appears to be in a dominant position as a provider of satellite television channels in the UK. You should choose at least two different perspectives from which to understand ways in which the business might lose its viability in the future.

This page includes the advice given to students before submitting the assignment as well as the feedback given afterwards. It also contains some more recent material.

Suggested Angles


Viability - Perceived and Actual

Framing the Analysis

BSkyB website

CorporateWatch report

Trusting Murdoch

veryard projects - innovation for demanding change

Analysing BSkyB - Suggested Angles 

veryard projects > business organization > case studies  > bskyb > angles

. Look at the company’s own website, especially the section aimed at investors. What is the company saying about itself and its future prospects?
. Look at the investment advice offered by city analysts and financial journalists. Are BSkyB shares regarded as good value? Look at the P/E ratio for BSkyB and compare it with other large media companies. Try to understand the reasons behind the current valuations. more
. What do Sky’s customers think they are paying for and what do they actually get for their money? Do the viewing figures provide evidence that Sky’s proposition to viewers is sufficiently attractive to fuel further growth?
. Look at the relationship between Sky and other companies in the Murdoch empire – News International and Fox. Look at the relationship between Sky and other UK broadcasters, including the BBC. Look at the relationship between Sky and sports organizations, including football. Can you identify anything that might affect these relationships in the future?
. How could Sky be affected by technological changes? Can you identify anything specific that might significantly change the market for satellite television? In what kind of timescale? 
. How could Sky be affected by regulatory change? Can you identify specific proposals that might affect Sky’s competitive position? How likely are these proposals to get implemented?
. What stakeholders are potentially affected by Sky’s commercial success or failure? What power do these stakeholders have, to do things that might affect Sky’s viability?

veryard projects - innovation for demanding change

Analysing BSkyB - Evaluation

veryard projects > business organization > case studies  > bskyb > evaluation

A good essay will: Thus a good essay balances facts, quotes, opinions and judgements.

Balance of Fact, Analysis and Opinion

Some essays were weak on facts. Some general theoretical material on what might be going on with Sky, apparently based on a reasonable grasp of (and sometimes beyond) the course content, but not grounded in any factual research as to what was really going on with Sky, or what different people thought.

At the other extreme, some essays were deluged in facts, but with no analysis to make sense of the facts. We got biographical details of the Murdoch family, and customer anecdotes of failed set-top boxes – possibly very interesting if you could find a way of linking it to the main topic of the essay (corporate viability), but otherwise a waste of space.

Some essays seemed to be composed entirely from extended quotes from journalistic sources, with no commentary or other material. Some essays relied too heavily on the Sky website, without balancing it against independent sources.

Unwarranted certainty

Black/white reasoning. "This certainly, inevitably will happen." "A causes B."

Some students fell into the trap of asserting something definite in one paragraph, and then asserting the exact opposite in the next paragraph. Better to adopt more cautious turns of phrase – "A tends to increase the chances of B."

Essays that used different sources of information at different times produced different facts. For example: different P/E ratios, different estimates for Tony Ball’s payoff.

Any sources – even respectable ones like the Financial Times – can get it wrong sometimes. Ideally, each fact or opinion should be referenced to its source. (Most students simply put a list of sources at the end.)

veryard projects - innovation for demanding change

BSkyB - Viability - Perceived and Actual

veryard projects > business organization > case studies  > bskyb > viability

Careful research will identify many different opinions on the future of BSkyB. In using these opinions to support an analysis, it is important to distinguish four things: While real viability can affect perceived viability, there are other (possibly irrational) influences on perceived viability that have nothing to do with real viability.  Conversely, the effect of perceived viability on  real viability is at best indirect (perhaps by affecting morale or the cost of capital) – but  any causal link in this direction cannot be taken for granted and should be explained.
viability - perceived and actual
more Viability (html)
Viability Course Notes (pdf)

Confusing cause and effect

High expectations of Sky’s future profits right arrow High demand for Sky shares right arrow High share price right arrow High P/E ratio

A high P/E ratio is a sign or indicator of high expectations. It is not generally a cause of high expectations in the company.

Generally, as share prices rise, fewer investors are willing to buy, and more investors are willing to sell. Thus share price increases are normally self-limiting. (There are some apparent exceptions to this, largely based on the behaviour of speculators, especially those who practise so-called momentum investing, which involves betting on the continuation of recent price movements. However, this is merely based on a prediction of short-term share price movements and does not represent a judgement about the underlying viability of the company.)
more Price/Earnings Ratio

Choice of measurement

On its website, Sky boasts about its success in terms of certain key measurements: growth, subscriber acquisition cost, churn, and average revenue per subscriber. Of course, we should expect Sky to choose those metrics that give a favourable picture. If you unquestioningly accept this choice of metrics, you are liable to agree with Sky’s picture, without quite knowing why. A well-chosen metric is a very powerful and a very subtle form of influence, and it is important for analysts to be aware of this.

veryard projects - innovation for demanding change

BSkyB - Framing the Analysis

veryard projects > business organization > case studies  > bskyb > frame

BSkyB appears to be in two linked businesses – content and delivery. The Sky channels (Sky One, Sky News, Sport and so on) represent content, which could be delivered via satellite, cable, terrestrial digital, and possibly broadband internet. The Sky delivery mechanism involves a system of satellites, dishes and set-top boxes, which can carry Sky’s own channels as well as third-party content.

When analysing the viability and competitive position of BSkyB, it may be useful to separate these two aspects. The competitors for content may be collaborators on delivery, and vice versa. Technological progress may affect delivery but has no direct impact on content, while the exclusive deals with football and other sports is about content rather than delivery.

Of course, BSkyB tries to use its power in delivery to enhance its position in content, and vice versa. Regulators may be expected to oppose this power. These complex games are very interesting in relation to the long-term viability of BSkyB – but difficult to analyse.

To what extent does BSkyB’s viability depend on dominating both delivery and content? Many students focused on challenges to the delivery mechanism, or challenges to the exclusive sports deals, without asking how these might be coupled or uncoupled.

Which system?

One student wrote: "BSkyB is at the opposite end of the spectrum to the BBC." This is an interesting comment from a systems thinking, because it raises the question Which Spectrum? There are many possible ways of framing the analysis – some of them focusing on the differences between BSkyB and BBC, and some of them focusing on the similarities. Different frames for the analysis may yield very different conclusions.

veryard projects - innovation for demanding change veryard projects > business organization > case studies  > bskyb
This page last updated on June 28th, 2004
Copyright © 2004 Veryard Projects Ltd