Sky toys with free-to-air channel

By KARYN SCHERER

Rupert Murdoch-owned pay television operator Sky TV is toying with the idea of introducing a free-to-air channel once it has persuaded all its customers to switch to its digital satellite service.

At its annual meeting in Auckland yesterday, Sky chief executive Nate Smith revealed that the company was considering three options for its UHF network: datacasting, a fast internet service or a free-to-air channel.

In September, Sky struck a deal with TVNZ's broadcast arm, BCL, which will allow it to continue offering the UHF service until 2010.

However, Sky has made it clear it wants to shift customers over to its new satellite service long before then.

Media group INL, which now owns just under half of Sky and has links with Rupert Murdoch's News Corporation, has previously indicated it would be interested in buying one or both of the free-to-air channels used by TVNZ if they are put up for sale.

It may well see the UHF service as a backstop plan. Across the Tasman, News Corp has been accused of similar tactics after its lobbying to be allowed to set up a commercial TV channel was rebuffed by the Government.

Although Australia has ruled out issuing any new free-to-air licences before 2007, it is allowing new datacasting services, which News Corp hopes to use to set up internet TV.

After the Sky meeting, INL chairman Mike Robson described a new free-to-air channel as "just a possibility - but it is an option."

Meanwhile, Sky says it hopes to introduce pay-per-view movies early next year, once the software is sorted out. It has also confirmed it is keen to introduce a sports betting service, probably around the middle of next year.

It is believed to be talking to Telecom about a possible joint venture which will give its subscribers access to the internet.

In September, Sky decided against a deal which would have seen it take a 30 per cent stake in the country's third-largest internet service provider, Ihug, which has since gone head-to-head with its former suitor with its own pay TV service.

Mr Smith said yesterday that the two companies "weren't aligned as well as we thought." However, he confirmed that Sky hoped to announce another deal within months.

He also confirmed that the company was keen to introduce a true video-on-demand service within the next year.

Described by Mr Smith as an "exciting capability," it will be made possible by a new decoder which includes a hard drive. This will enable customers to download additional programmes on to a disk.

Sky has confirmed it is likely to make a bottom-line loss for the six months to the end of December, as it continues to subsidise the cost of signing up new customers.

Mr Smith said it expected to continue to make losses "for the next year or so."