In the time it took for D-MAC to be perfected and Marcopolo to launch, Murdoch had found a quicker, cheaper way of breaking the monopoly BSB imagined it enjoyed. For £54 million he took
out a ten-year rental on Astra, a privately financed European satellite, launched from French Guiana. Its PAL transmission was less advanced than D-MAC, though it had the advantage of being tried,
tested and ready. Astra also offered the prospect of relatively easy expansion, since it had vastly more space than Marcopolo to add extra channels whenever the demand was found for them. Since
Astra’s owners were registered in Luxembourg, Murdoch did not need to apply to the IBA for a licence, since the latter’s remit did not run to foreign frequencies and satellites. At a
stroke, the BSB monopoly had been breached; Sky was the new Radio Caroline, broadcasting from beyond national regulatory jurisdiction. Although the Broadcasting Act 1980 prevented national
newspaper owners or non-Europeans from owning more than 20 per cent of a British television company – requirements Murdoch failed to meet on both counts – these stipulations had not
been extended to include broadcasting from medium-power, foreign-registered satellites like Astra. Despite petitioning from BSB, the government failed to extend them when the legislation was
updated in 1990. Given that it had expected a monopoly in return for adhering to the expensive regulations foisted upon it, BSB was understandably aggrieved. But the Thatcher administration had
built its reputation as a promoter of competition, not a restrictor of it; the prime minister admired what Murdoch had done to remove trade union power in the newspaper industry and was grateful
for
The Sun
’s political endorsement. It fell to the House of Lords to consider an amendment that would have extended the restrictions on ownership to include Sky. Willie (by then Lord)
Whitelaw weighed in to assure his fellow peers that Sky News would ‘waken up both the BBC and ITN’,
40
and despite the contempt Murdoch
had regularly voiced towards the British establishment, their Lordships turned the other cheek. He was free to continue breaching the walls from the outside.
With Alan Sugar switching sides so that Amstrad manufactured the Sky dishes and Richard Branson’s Virgin speedily offloading its stake in BSB, the
battle for what
the press predictably dubbed ‘Star Wars’ became exceptionally bitter. The difference in tone and attitude was starkly apparent to anyone visiting their rival headquarters. Sky inhabited
a glorified shed, hurriedly erected without thought to aesthetics or grandeur, on a nondescript industrial estate near Heathrow airport. Alcohol was banned but smoking was unrestricted. BSB
occupied Marco Polo House, a shiny new glass and marble temple of postmodern triumphalism just off the Thames at Battersea. Smoking was banned but wine cabinets were unrestricted. At Sky, company
cars were banned; at BSB even an executive’s mother-in-law was given one.
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The difference in management was equally stark. Having portrayed
Sky as the opponent of cultural elitism, an unpretentious liberating force that would give the public what it wanted, Murdoch was not going to entrust it to Englishmen. Sky’s senior
management was disproportionately Australian, while the executive chairman was Andrew Neil, the hard-working, non-deferential Scot who was simultaneously editing Murdoch’s
Sunday
Times
. At Marco Polo House, BSB’s chief executive was Anthony Simonds-Gooding, the Anglo-Irish, Ampleforth-educated grandson of a big-game hunter. Popular with his staff, his career had
been in marketing, first with the drinks firm Whitbread (he had run Heineken’s ‘refreshes the parts other beers cannot reach’ campaign) and then as a global executive at Saatchi
& Saatchi. The more Sky positioned itself as the great cultural emancipator, the more Simonds-Gooding effectively disparaged it as the moving images edition of the
News of the World
. Yet
it was not really quite the struggle for the soul of national culture that either side claimed. The reality was more prosaic, because the victor would be determined less by whether the offering was
upmarket or downmarket than by such pressing considerations as speed and ease of product availability and the resources required to sign up the most popular films for its movie channel. Ultimately,
it was Hollywood, not home-grown production values, that both sides really believed would prove the biggest draw. In that sense, British tradition had already lost the culture war, regardless of
who won ‘Star Wars’. With Sky and BSB trying to outbid each other for the rights to each of the seven major studios’ films, they ended up committing themselves to forking out $1.2
billion for Hollywood movies over the next five years. The auction’s real winner was Los Angeles.
In the race to launch first, Murdoch trounced Simonds-Gooding. Sky had a fifteen-month head start, going live on 5 February 1989 with a four-channel network (Sky One, Sky News, Sky Movies,
Eurosport). Yet this advantage was partly lost by supply problems which limited the availability of dishes for sale. At £300 for a start-up kit, their cost was hardly negligible for the low
to middle market at which they were aimed. With only ten thousand sold by July, Sky may have been broadcasting but hardly anyone was watching. The joke went round that Salman Rushdie had found a
hiding place from his would-be assassins as a Sky presenter. Those who did sign up discovered that much of the output consisted of American imports and minor sporting events.
The tiny viewing figures (not that
The Sun
took to describing it as ‘The Channel Nobody is Watching’) were disastrous for advertising revenue, which was the only source of income
until February 1990 when the encryption technology was finally perfected to enable Sky to charge its viewers. Tempers frayed and executives came and went with bewildering speed. Eventually, in
September 1990, Murdoch brought in Sam Chisholm, another abrasive Australian with a default dislike of the British establishment matched with a fierce determination to cut costs. At the same time,
a change of strategy meant that a direct sales team supplanted high-street retailers as the main distributors of start-up kits. Sky became available through monthly rental, without any upfront
charges for the receiver equipment. This significantly boosted the number of Sky dishes in evidence, particularly on housing estates (doubtless a factor in ensuring that middle-class neighbourhoods
self-consciously eschewed them). BSB finally went on air in April, with five channels and some already familiar faces from terrestrial television, including Sir Robin Day and Selina Scott. Their
salaries were greater than their viewing figures. While Sky dishes were now easily obtainable, supply problems dogged BSB’s far more discreet, diamond-shaped ‘squarial’.
‘It’s smart to be square,’ ran the promotional slogan – to little effect, since six months after going live scarcely 120,000 squarials had been sold (by which time Sky had
750,000 subscribers). Given that the two technologies were not compatible, the public seemed wary about investing in either dish or squarial until it was clear which would ultimately triumph
– a hesitancy that, logically, could only ensure that neither did. Such nervousness was understandable, since choosing the wrong system would leave them with a useless technology – as
Betamax purchasers had discovered in the battle of the video systems scarcely seven years earlier.
For all the promise of more choice, by the summer of 1990 it looked as if Britain’s satellite experiment would end with both rivals bludgeoned to extinction. BSB was haemorrhaging £8
million per week, with accumulated debts that by the autumn were heading towards £1 billion. Yet, for Sky’s employees the news that they were only blowing £2 million a week was
little consolation. Murdoch had backed his entire company – including
The Sun
and
The Times
as well as his American assets – on Sky succeeding. He found himself
desperately pleading with 130 different banks to reschedule the $8.2 billion debt (equivalent to the national debt of Ecuador) with which his company, News Corporation, was now saddled – for
to add to Sky’s drain on its resources, News Corp had bought
TV Guide
in the United States for $3 billion. With these debts maturing, and unable to secure sufficient bridging loans
unless he could convince lenders that he had a plan to
plug the losses, Murdoch’s empire stood on the brink of collapse. He needed to sign an armistice every bit as
much as did the consortium that owned BSB, a reality made explicit by the speed with which the warring parties silenced their guns. Secret talks got under way and on 2 November 1990, without the
involvement of either Simonds-Gooding (who was enjoying a family holiday in Ireland) or the IBA regulator, the two companies agreed a fifty-fifty merger. The new company would be called British Sky
Broadcasting (BSkyB), but would trade as Sky. It was soon apparent that the merger was, as the shortened title suggested, rather more of a takeover than a fusion of equals. Given that the former
BSB holding was split between the major members of the consortium, News Corp was by far the biggest shareholder in the new company, and its executives took over most of the leading roles (a
bewildered Simonds-Gooding was curtly informed not to turn up at Marco Polo House – his belongings would be sent on to him). The BSB channels were ditched or submerged into those offered by
Sky; the Astra satellite and PAL were kept, the Marcopolo satellite and D-MAC were ditched. The dish had trumped the squarial.
The alarm and outrage stretched beyond the owners of redundant receiving equipment who found themselves urgently seeking a refund or an upgrade. The IBA considered taking legal action to block
the merger on the grounds that BSB had breached its contractual obligations, only to decide that forcing BSB to stand alone would hasten its collapse. This calculation was not made by the
opposition front bench. Condemning the ‘Skyjack’, Labour’s broadcasting spokesman, Robin Corbett, announced his party was ‘totally opposed to a satellite monopoly,
particularly when controlled by a non-EC national [Murdoch]’.
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In reality, the Monopolies and Mergers Commission was never likely to block
the creation of BSkyB since its 1 per cent share of the UK’s television audience was scarcely a stranglehold. To have reached even that meagre level of penetration, BSB and Sky had between
them spent around £1.25 billion, which was the equivalent of what the annual licence fee generated for all BBC television and radio nationwide.
43
‘They had simply spent themselves into oblivion, all of them,’ concluded Sky’s Sam Chisholm. ‘The truth was that both businesses were conceptual
failures . . . it hadn’t just been a failure, it had been an appalling failure.’
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The merger helped ensure that two months later
Murdoch was able to reschedule his debts, but the turnaround in Sky’s fortunes was far from immediate or certain. Salvation did eventually come, though less from screening Hollywood movies
than from showing the English Premier League. Sky’s £304 million winning bid for the football rights in 1992 demonstrated that satellite television could indeed compete with terrestrial
television, with results that were to prove as profound for broadcasting as for football.
None of these consequences was yet evident when the eighties ended. In output and audience, neither the BBC nor ITV had changed radically over the decade. The
government’s requirement that they both commission at least one quarter of their programmes from independent production companies did not take effect until 1990. There was much that caused
irritation to Downing Street, particularly Thames Television’s
Death on the Rock
documentary looking into the circumstances in which three IRA terrorists were shot dead in Gibraltar by
the SAS in 1988, but it was the BBC’s continuous tone and corporate culture that irritated Thatcher throughout her time in office. The most serious breakdown in relations came in 1986 over an
episode of
Secret Society
in which the investigative reporter Duncan Campbell revealed the existence of Project Zircon, a secret satellite that spied on the Soviet Union, which, he alleged,
the government had concealed from the public accounts committee (though the project had actually been cancelled).
45
Special Branch duly searched the
offices of BBC Scotland and the
New Statesman
magazine, as well as Campbell’s home, for evidence of illegally obtained state documents. With an injunction issued and fearing
prosecution under the Official Secrets Act, the BBC’s director general, Alasdair Milne, postponed broadcasting the programme (it was eventually shown in 1988). For Milne it was but the latest
in a series of controversies that had pitted him against the government, and he was forced out in January 1987 when the board of governors, led by its new chairman, Marmaduke Hussey, made it clear
they had lost faith in him.
While many within the corporation – and beyond – identified Hussey as a man brought in by the government to clip the BBC’s wings, he nevertheless rejected the demand of the
Conservative Party chairman, Norman Tebbit, for an investigation into what Tebbit claimed was the BBC’s biased reporting of the United States’ air strikes against Colonel Gaddafi
’s Libya. Such was Conservative Central Office’s ongoing anxiety that in 1987 it established a unit specifically tasked with monitoring BBC output for signs of anti-Tory bias – a
move that made the party look as obsessed with perceived slights from the BBC as was the Labour leadership with the unabashed assaults of Murdoch’s
Sun
newspaper. Tory suspicions were
heightened when the corporation suddenly cancelled Ian Curteis’s
The Falklands Play
, to which it had committed a £1 million production budget and a three-hour prime-time BBC 1
slot, scheduled for April 1987. According to Curteis, the BBC demanded script changes to remove scenes of Thatcher appearing distressed by news of British loss of life and to create new dialogue
between Cabinet ministers to show that the prosecution of the Falklands War was actually linked to party political and electoral calculations rather than principles of national
sovereignty.
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For its part, the BBC claimed the cancellation
was to safeguard against the possibility that Thatcher might
call a general election at the very time a play was portraying her in a sympathetic light. The corporation duly went ahead with filming Charles Wood’s
Tumbledown
, a drama about a
soldier (played by Colin Firth) crippled, mentally debilitated and disillusioned by his experiences of fighting in the Falklands conflict.