Armed with the likes of Mr. Ed, Charlie's Angels and a communications satellite, Rupert Murdoch is zapping some competition into Europe's traditional television broadcasters.
The Australian press baron, best known for a newspaper empire that stretches across three continents, also is principal owner of Sky Channel -- Europe's first truly commercial cable television network. Although only a fraction of Europe's estimated 100 million television households are now on cable, Sky Channel can reach nearly 3 million viewers and is growing. Over the past four years, it has become a medium that has piqued serious advertiser interest while posing thorny challenges for countries that want to continue to strictly regulate the sort of programming their citizens can watch.
"There's no reason why a Pan-European entertainment channel shouldn't work, and Murdoch has the lead service in an expanding market," said John Howkins, executive director of the International Institute of Communications in London.
If Murdoch can continue to increase Sky's audience and revenue while avoiding political complications, he could well become one of Europe's most profitable and influencial broadcasters -- much as he is now one of its most profitable and influential publishers.
Sky Channel was conceived by Brian Haynes, a British television journalist who had done a documentary on Ted Turner, the American cable television entrepreneur. Noting that Turner had transformed his local Atlanta television station into a national "super station" by using a satellite to beam its programming to cable systems around the country, Haynes reasoned that the approach could work in Europe. He figured that television advertisers, frustrated by local advertising restrictions, would leap at the chance to bypass the tightly controlled national television broadcasters.
After considerable bureaucratic wrangling, Haynes managed to secure a slot on a satellite owned by European postal agencies, and, in 1981, Satellite Television PLC was beaming a few hours of programming a day to a handful of cable systems across Europe on an "experimental" basis.
Two years and $6 million later, Satellite Television investors had had enough and turned to Murdoch. A shrewd opportunist, Murdoch recognized the growth potential for commercial television in Europe, paid roughly $8 million for a 65 percent stake in Satellite Television PLC and renamed it Sky Channel.
Sky, as the channel is called, poses an interesting set of opportunities and problems for its owner. On one hand, its satellite signal blankets Europe, allowing Sky to reach all the cable systems it needs to build the mass audience advertisers desire. On the other hand, if cable systems won't pick up its signals, Sky will have no audience.
Most European countries are very reluctant to turn over their cable lines to foreign programmers. Moreover, different countries have radically different television regulations on everything from foreign content to number of advertisements allowed per hour. No single television service could comply with all the rules.
Despite this regulatory thicket, Sky has successfully negotiated cable links with countries throughout the continent -- including Germany, Britain and the Netherlands.
"Sky has been the battering ram of television deregulation in Europe," asserted Claire Enders of Thorn EMI's Music Box channel, a Pan-European cable service similar to Warner-Amex's MTV. She said Sky's existence has forced television regulators to rethink their assumptions about the future of commercial television in Europe.
"We've made compromises that we didn't have to," said Patrick Cox, Sky's managing director. "We don't carry ads for alcohol, or pharmaceuticals, for example. "I like to say that we make programs, not law cases. You can't stop and fight legal battles when you're trying to build an international network."
This get-along-go-along policy -- plus the quiet belief of many in Europe's television community that Sky just might win a legal case if it were denied access because of its foreign origin -- has enabled the satellite broadcaster to gain the cable access it needs to show viewers its brand of television.
"We're Europe's first wholehearted television entertainment channel," said Cox, who came to Sky from Radio TeleLuxembourg, the Luxembourg-based television broadcaster. "It happens to be going through cable because it's the only way to go."
As Cox suggested, Sky certainly is an "alternative" to the public-interest offerings served up by most of Europe's state-run broadcasters. For nearly 10 hours a day, Sky offers its viewers a video potpourri of programs ranging from American standards such as Mr. Ed, a 1960s comedy about a talking horse, to SkyTrax, a music video program produced by Sky, to old movies and sports events.
"The Sky audience is the 'Dallas' audience," said Thorn EMI's Enders, referring to the Lorimar series that's been an enormous hit throughout Europe.
"It's advertiser-supported tabloid television," asserted the International Institute of Communciation's Howkins, alluding to Murdoch's shrill tabloids such as the London Sun and the New York Post, which are better known for easy sensationalism than hard news.
"What the audience tells us is that they love it," countered Cox, who said he has the ratings to prove it.
Sir James Carruthers, who sits on the board of Murdoch's News Corp. and advises Cox on television programming, added, "These programs may be reruns to Americans, but nobody in Europe has ever seen them before."
This brew of popular entertainment hasn't captured only cable viewers -- it has attracted advertisers as well.
Advertising will be the key to Sky's profitability. J. Walter Thompson, the advertising agency, estimates that European advertisers would spend at least $1 billion annually on televising if current restrictions were removed. Since it began operating, Sky has attracted blue-chip multinational advertisers ranging from International Business Machines Corp. to Procter & Gamble Co. to Mars Inc. These companies would like to explore the potential of international advertising, and are eager to communicate with viewers who are difficult to reach on local television.
Many advertisers are particularly intrigued by the concept of global advertising: taking a single theme and using it to advertise a product the same way around the world.
Traditionally, international marketing has been based on the differences between people, regionally and nationally. Global marketing targets the similarities. McDonald's, Coca-Cola and Levis are examples of world brands that can be advertised the same way around the globe.
"Barbie is a world brand," said Andrew B. Dobbie, marketing director for Mattel Toy Europe. "Many of our products have the wherewithal for us to be able to exploit Pan-European advertising." So Mattel is advertising on Sky.
"They're attacking the problem in a professional way," Dobbie continued. "At the moment, they're the leaders of the pack. We consider our advertising on Sky to have been successful so far."
"We take Sky seriously," said Thomas F. McGuire, a management supervisor of Batten Barten Durstine Osborne's International Wrigley's Gum account. "If this is going to catch on, then getting in on the ground floor is important. It's the closest thing in Europe to American commercial television . . . and we've gotten results with it."
Mattel's Dobbie went so far to suggest that, as Pan-European television grows, "it will affect the creativity of commercials -- there will be less language and more visual emphasis. Eventually we'll see commercials developed exclusively for Pan-European television."
That trend could be challenged by the growth of private television stations in Europe, which could create markets for local advertising that then might soak up revenue that otherwise could go to Sky and other Europeanwide broadcasters. Italy already has authorized dozens of private stations, and France and Spain seem headed in the same direction.
Despite initial enthusiasm from many advertisers and viewers, there still is significant concern over the future of Sky and Pan-European television. The growth of cable television in Europe has been far slower than expected. News Corp.'s Carruthers conceded that "we were very hopeful that we'd have half a million homes in the U.K. by now -- now we have only 100,000."
Murdoch is particularly interested in the English market because he will be able to use his newspapers to promote the service.
Although Germany, Europe's largest television market, is cabling at a good clip, uncertainty and confusion surround the cable scene in both Britain and France. In Britain, investors are questioning the economics of cable. In France, politics may well preclude foreign broadcast signals.
Even without France, Cox expects Sky to have more than 7 million potential viewers by the end of this year if it gets permission to link with Belgium's cable systems. He hopes Sky will reach 9 million cable households by the end of 1986.
Assuming it meets projections, Sky is expected to break even this year on revenue of just under $10 million -- which, as the British would say, "is pretty small beer," given that Murdoch's News Corp. is a $1.8-billion-a-year business.
Still, News Corp.'s Carruthers said that, "If in five years, we've got 15 million connections and good ratings, this could be a very, very good business for us."
Even if Sky fails to live up to expectations, Murdoch knows that there is a lot of money to be made from commercial television in Europe. No one doubts that he will continue trying to find it.