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BSkyB takes Web gamble
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May 10, 2000: 10:23 a.m. ET
Broadcaster buys Net betting firm, posts loss, awaits soccer auction result
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LONDON (CNNfn) - British Sky Broadcasting, the U.K.'s largest pay-TV company, agreed to buy online betting company Sports Internet Group for about £301 million ($460 million) and said it had a third-quarter loss as a result of the rising cost of attracting subscribers to its digital network.
The company, 40 percent owned by Rupert Murdoch's News Corp. (NWS: Research, Estimates) and 24 percent by France's Vivendi (PEX), aims to bolster its appeal to sports fans by adding Sports Internet, a provider of gambling services.
Sport has been a key driver of growth at BSkyB, which aggressively has bought up the rights to screen audience-grabbing sporting events. It is now in the throes of a battle with cable and other media companies to retain the rights to broadcast English Premiership soccer, and is expected to bid about £1 billion for a three-year contract to show matches.
The auction for rights to screen top-level British soccer ends Wednesday, when sealed bids must be delivered to the soccer authorities. BSkyB led the commercialization of sporting rights in Britain, and analysts said the firm is favorite to triumph again:
"I would be completely dumbfounded if BSkyB lost the rights...if they lose it's going to be for such a ridiculous amount of money that the winner won't be a winner at all," according to analyst Julien Roch at Lehman Brothers.
Still, some reports have put bids as high as £2 billion, and whatever price eventually is paid it certainly will be far in excess of the £670 million BSkyB paid for the existing four-year contract, which expires at the end of the 2000-2001 season.
Crucial this time around will be rights to broadcast matches on video-on- demand services. These did not exist when the contract was last renewed.
 The expansion of BSkyB's activities into online gambling reflects the increasing importance of the Internet to media companies.
"The acquisition of SI brings an excellent range of quality online activities," BSkyB CEO Tony Ball said. SI "will enable BSkyB to continue to occupy a leading position in the broadband era."
BSkyB (BSY) is offering 0.5622 new BSkyB share for each Sports Internet (SRT) share, valuing the online betting Web site at 850 pence a share.
Shares in BSkyB slumped more than 8 percent in late London trading Wednesday, falling to 1,385 pence.
The company earlier said it slid to a third-quarter loss of £22.4 million, or 1.3 pence a share, from a profit of £11.7 million, or 0.6 pence a share, a year earlier.
Third-quarter revenue, including BSkyB's share of sales at joint ventures, rose 20 percent to £480.6 million, while operating expenses grew to £443.9 million from £345.2 million a year earlier.
BSkyB said it had 3.4 million digital customers to date, and a total of 4.1 million satellite customers. Subscribers to its channels across all platforms rose to 8.6 million.
The company last week completed the acquisition of a 24 percent stake in Germany's KirchPayTV. 
-- from staff and wire reports
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