British Rivals Fight `Star Wars'

THE broadcasting industry is calling it ``star wars'' - a looming battle between two rival companies beaming programs via satellite to paying British audiences. The questions are: Can Britain sustain two satellite services? If not, which will win?

Rupert Murdoch's Sky Television is already operating. According to industry estimates, its four channels are losing $5 million a week because of sluggish viewer response.

The financial burden Murdoch is having to carry to push Sky TV was revealed on Feb. 15 when his United Kingdom holding company, News International (NI), chalked up a $108 million loss for the second half of 1989, compared with a $70 million profit in the previous year.

Most was incurred by Sky. NI said the loss was ``in line with our long-term business plan.''

Mr. Murdoch believes that being first in the field gives him the edge. ``It is my biggest gamble, and I'm determined to see it through,'' he says. He is prepared to sustain losses for five years.

Preparing for launch

British Satellite Broadcasting (BSB), after a yearlong technical delay, is gearing itself to launch its five-channel service in April. In some ways this promises to be the more ambitious project, backed by a $2.15 billion cash injection.

BSB, a consortium of four major shareholders, is equally bullish. Anthony Simonds-Gooding, its chief executive, says: ``We shall be offering a quality product. We have huge resources. And we have a better technical system than Sky.'' He shrugs off the launch delay, caused by difficulties in producing enough receiving dishes, as ``irritating but not vital.''

``When viewers get a chance to compare the two systems, it will be obvious who has audience appeal,'' he says.

When both services are up and running, the subscription cost for each is likely to be around $16 per month.

Sky offers separate channels for news, sports, general entertainment, and movies. By wide consent among TV critics, the 24-hour news service is the best of the four in terms of quality, but Murdoch is pinning his hopes on movies as the eventual moneymaker. He promises to broadcast 400 new films this year.

BSB's five channels will be devoted to general entertainment, information, sports, pop and rock music, and movies. Mr. Simonds-Gooding has struck deals with Paramount, Universal, Columbia/Tristar, MGM, Orion, and Warner Bros. His officials say the films may be fewer in number but much higher in quality than Sky's.

Both services expect movie subscriptions to produce around two-thirds of revenues for the first five years of operation. Video cassette threat

Brian Wenham, a former senior TV executive at the British Broadcasting Corporation (BBC), says both Sky and BSB may have underestimated the preference of many British viewers for films on videocasette, rather than via satellite. The first encounter may be less between them, and more between them both and video, ``a well dug-in third force.''

The sharpest contrast between the competitors is technical. The two transmitting systems differ radically. Viewers will not be able to tune into both without redirecting their receiving dish.

Sky rents its channels from the multi-channel Astra satellite hovering above Europe. Its dishes have to be perfectly positioned to pick up transmissions.

BSB will use its own Marco Polo 1 satellite to beam high- definition pictures to square-shaped dishes (called ``squarials''), half the size of the Sky receiving dish.

Sky viewers will need ``smart cards'' to be able to watch encrypted movies. BSB has chosen a system known as Eurocypher to scramble all its programs.

The price of receiving equipment for Sky TV is between $330 and $580, depending on quality. BSB says its target price for receiving equipment is ``around $500,'' so here too the competition promises to be brisk.

So far viewers have been slow to purchase Sky equipment. Murdoch's company is reluctant to give figures for purchases of dishes, or for the numbers who are choosing to rent equipment at about $8 a week.

Low viewer interest

According to a survey by the Independent Television Authority, a government-appointed TV watchdog body, a year after Sky began transmitting its service, more than 80 percent of viewers said they had little or no interest in renting or buying satellite TV reception equipment.

A Sky executive said attitudes would change when both the rival services were operating, and major promotions got under way.

At present, there are only four non-satellite channels regularly available to British viewers: two from BBC and two commercial channels. A fifth terrestrial channel planned for 1993 will reach 70 percent of the country.

Sky and BSB will be competing against each other for advertising, and also against the land-based commercial channels.

The giant group Unilever says it has started off modestly, because audience forecasts for the first year or two are modest too.

Woolworths, another big advertiser on land-based companies, is holding off until viewers signal interest in satellite TV.

A crucial factor in the coming ``star wars'' contest will be promotional advertising. Murdoch, who owns five major newspapers in Britain - the Times, Sunday Times, Sun, News of the World and Today - may enjoy an edge.

BSB will have to purchase advertising space across the entire range of newspapers and other media outlets. The company has earmarked $500 million for promotion and advertising in the next three years.