It has been a busy week for U.K. satellite pay-TV operator, BSkyB. Along with being involved in a frenetic auction for English Premier League soccer rights, the operator announced details of an intriguing trial with U.S. wireless technology vendor Qualcomm to test mobile content delivery technology.

The two companies will conduct technical trials of Qualcomm’s MediaFLO technology in the United Kingdom. The technical trial will feature 10 channels of BSkyB content on a small number of non-commercial devices provided by Qualcomm. The trial will allow BSkyB to evaluate the performance capabilities of the technology, an open, cellular, network-agnostic wireless multicasting technology.

BSkyB already has a number of deals in place to distribute its content on mobile devices. In particular, the operator has an innovative deal with Vodafone where Vodafone’s 3G customers can pay up to 10 British pounds ($18.60) a month for entertainment and news and sports related content. The deal is a significant one for Qualcomm and a potential validation of its MediaFLO technology in Europe, Omar Javaid, senior director at Qualcomm told Satellite News. “The significance is that, this is our first announced trial in Europe, and it is with a major partner like BSkyB,” he said. “While it is a technical trial, what we have been saying all along about our technology is it is one of those technologies that will enable operator’s to derive significant business advantages. The purpose of the trial is for Sky to evaluate and other partners to evaluate our core technical claims and use that to inform their thinking of the business and the development of the business case.”

Teaming up with an innovative player such as BSkyB will only help Qualcomm establish MediaFLO in Europe, Javaid said. “We think this will have knock-on effects. They (BSkyB) are an innovator and have been very progressive throughout their history about adopting new technologies and new platforms. I think the relationship we have announced is consistent with that,” he said.

BSkyB is the first announced trial for Qualcomm in terms of MediaFLO in Europe. While wireless operators would seem more natural partners than a satellite pay-TV operator, Javaid believes the technology will attract operators, broadcasters as well as TV operators such as BSkyB. “Our approach to trials is to do trials with significant partners where we believe there is a path to commercialization,” he said. “Whether that is with pay-TV operators or wireless operators or public broadcasters, or a combination of these in the mix, we evaluate it on a market-by-market level. What we are doing in the United States is a subscription based service, which is essentially a pay-TV service. We think that is the right model for advanced markets like Western Europe.”

The trial with BSkyB could speed up the process of MediaFLO making an impact in Europe. “In 12 months time, I would like to see announcements with significant companies in Europe and trials and have some pre-commercial trials and even some commercial implementations in continental Europe as well as the U.K.,” Javaid said. “… Italy has been the most progressive in Europe in this area. The U.K. has potential. Ofcom has talked about options for the L-Band spectrum. They have made some public statements about UHF. I think things could move pretty quickly there. In other markets, it will take longer.”

Football Rights

BSkyB has won the majority of the Premier League soccer rights, which have been auctioned in recent weeks. Having previously held a monopoly of the live rights, this time around the operator won only four out of the six Premier League football rights packages between 2007 and 2010. Setanta Sports, the Irish channel provider, won the remaining two packages.

Setanta was expected to win one package, but it was surprised observerd when it picked up two. So, what impact will it have for BSkyB to lose two packages? To head off one potential impact, BSkyB and Setanta have already agreed a deal where all games can be shown in pubs and clubs through a single subscription. Revenues through pubs and clubs is a critical element of the deal.

The auction had good and bad news for BSkyB. In terms of its competitive position, Conor O’Shea, a media equity analyst at Teather and Greenwood, said in a research note, “Crucially, Sky managed to retain the 4 p.m. Sunday slot of games (Package A), which is critical for its commercial subscribers (pubs & clubs), who we estimate account for about 8 percent of subscription revenues or just over 5 percent of group sales. We are not concerned that Setanta has won the two least attractive packages. This is the lesser of several evils for Sky, a better outcome than if they had gone to free-to-air or NTL,” he said.

BSkyB is paying around 1.3 billion pounds ($2.4 billion) for the four packages on, a sizeable increase compared to its previous deal, and also this time BSkyB does not have exclusivity. “The overall price that Sky is paying is above our expectations,” he said. “We had anticipated an overall increase in content cost of 10 percent, which would knock 0.7 percent off 2008’s margins. Instead the increase is 30 percent, and therefore a direct hit of 2.2 percent to margins.”

Nick Bell, a media equity analyst at Bear Stearns, wrote in a research note that costs were higher than anticipated, but overall does not expect subscriber numbers to be effected. “Subs should be secure,” he said. “In our view, Sky Sports subscriber numbers should be unaffected by loss of two packages as the service will be screening 92 matches per year versus 88 currently, and they remain the top games. The Setanta sports channels are available on BSkyB’s platform and are likely to retail for a monthly fee below 20 pounds ($37.20).”

–Mark Holmes

Contact, Jeremy James, Qualcomm, e-mail, [email protected]
Robert Fraser, BSkyB, e-mail, [email protected]
Conor O’Shea, Teather & Greenwood, e-mail, [email protected]
Nick Bell, Bear Stearns, e-mail, [email protected]