MTV to lose £5m in new Sky deal

net1

Music channel MTV has ended its uneasy stand-off with BSkyB but will lose about £5m a year under the terms of a reduced distribution contract negotiated with pay-TV giant.
For months MTV, owned by US media giant Viacom, and BSkyB, the pay-TV broadcaster 36% owned by Rupert Murdoch's News Corporation, have been at odds over the amount that BSkyB pays to distribute its channels to the company's near-seven million subscribers.

It is understood that, after lengthy negotiations, the two sides have compromised on a deal that will see BSkyB cutting the amount it pays Viacom by between 20% and 25%. The deal is estimated to be worth around £20m to MTV alone.

The move will hit MTV hard, just as the channel and companion services MTV2, MTV Base and The Music Factory were fighting back against the challenge posed by Emap-owned channels The Box, Q, Smash Hits, Kiss and Magic.

Although it will receive less in subscriber revenue, the consequences would have been much worse if BSkyB had gone through with its threat to cancel the deal altogether.

The BSkyB chief executive, Tony Ball, is determined to slash the amount the company pays per subscriber to the channels on sky digital.

The deals were originally struck when sky digital was launched in 1998 and the broadcaster was desperate for quality content.

Now the broadcaster has almost 7 million subscribers the tables have turned and Mr Ball had threatened to stop paying MTV altogether, along with other Viacom channels Nickelodeon, VH1 and the Paramount Comedy Channel, if an agreement could not be reached.

"We mightily over-delivered on the number of viewers," Mr Ball said, adding most channels signed up to the sky digital service only anticipated it having 4 or 5 million subscribers by now.

The Emap channels, the Vivendi Universal-owned Sci-Fi Channel and the BBC joint venture UKTV, which includes UK Gold and UK History, have already been forced to renew at vastly reduced terms since the beginning of last year.

"We're getting reductions of 20 to 25% on the cost of channels going forward," Mr Ball said.

Earlier this year, Mr Ball said the channels under threat re-purposed most of their content from American versions of their channels and had been getting an "easy ride" while not delivering the required audiences.

Sumner Redstone, the chairman of Viacom, waded into the row in November last year by saying BSkyB was in danger of becoming an all-powerful "digital gatekeeper".

MTV has recently been improving its audience share against the Emap channels by investing in original programming such as The Osbournes, Jackass and a new UK version of US hit Total Request Live.

It has also, so far, seen off the challenge of the three music channels launched by Sky earlier this year.

Since the start of the year, MTV channels have amassed a 56% share in all multichannel homes, while Emap attracted a 39% share.

In contrast Sky's channels The Amp, Flaunt and Scuzz had just a 5% share of viewing. They were described yesterday as a "work in progress" by Mr Ball.

Sky's head of music, Lester Mordue, left the company last week after just six months.

Sky is also due to renegotiate its deals with the four big film studios, all of which are up before the end of 2005, and Mr Ball said he was prepared to drop one of these agreements if they could not be restructured.

He also revealed the company was close to sealing a deal to show its own premium channels on NTL in a similar agreement to the one recently signed with Telewest.

cjgall

I take it t that consumers will benifit by a reduction in subscriptions fees? lol