Monti threatens Sky's game

PROFIT projections for James Murdoch's BSkyB, showing earnings heading into the stratosphere over the next three years, are based on the assumption that the satellite network can keep or add to its seven million subscribers.

But fickle audiences cannot wholly be counted upon to keep paying unless the network delivers improving content. The jury is still very much out on this score. The most vital ingredient of BSkyB's success has been its lock on coverage of Premiership football.

There are increasing signs that when it comes to the new Premiership contract, BSkyB may not get what it wants. EU Competition Commissioner Mario Monti is deeply unhappy with the way BSkyB threw money at the auction and in the process won the rights to the best games on Sunday and Monday - the gold and silver packages.

Monti is planning to issue a 'statement of objections', which is tantamount to a competition case against the BSkyB contract. He believes that these rights are too valuable to go to any one commercial enterprise.

He wants a deal similar to those done with the Champions League and Bundesliga in Germany, where the best games have been split among broadcasters.

This will be a problem for new chief executive James Murdoch, 30, who may be expert at dealing with the authorities in the Far East but has yet to experience a blast from the European Commission.

If BSkyB's sports franchise were to be weakened, viewers might well question how worthwhile it is to subscribe for a sub-standard Sky One channel and movie channels which are forever recycling the same material.

James must also deal with the corporate governance challenge. This goes beyond smiling nicely in interviews and referring to his father as 'the chairman'.

An excoriating article in Financial News by Iain Richards of Morley makes clear the challenges ahead for independent directors Allan Leighton and Gail Rebuck if they are to burnish BSkyB's governance. Richards identifies 'an extensive web of related party transactions with News Corporation and Murdoch interests' involving more than £100m.

Such inter-company transactions must be a matter of disquiet for outside shareholders.

At the very least, this week's annual general meeting provides an opportunity for Murdoch father and son to make a commitment to clean up conflicts.

Low flying

BRITISH Airways has a long way to go before it fully recovers from the travails of recent years. But no one can accuse it of failing to take the right steps.

Under Rod Eddington it has taken a scythe to costs, delivering better than it promised, with more to come.

The group has changed its whole marketing strategy, competing as a low-cost quality carrier in Europe and as a premium service on long-haul routes. But it is having to do so with a broken wing. The infrastructure at Heathrow, including the lack of a third runway, puts it at a disadvantage to European competitors. Moreover, unlike Air France, with a government shareholding, it is out on its own.

This means it is entirely responsible for having to get down the debt burden of £4.8bn and funding a pension fund deficit that is expected to cost it a further £100m every year. Against this background it is inevitable that the downsizing of recent times will have to continue.

What is most disappointing is that the upturn seen in the American economy, the recovery in Japan and the brighter noises coming from Brussels are not being reflected so far in increasing levels of premium travel.

The struggle for survival is far from over. But BA retains some credit for being one of the few flag carriers to remain in the black without subventions from government.

House prices

THE latest house price figures from the Land Registry and the Office of Deputy Prime Minister are slightly less alarming than those from the big mortgage lenders. They show that the market was coming off the boil in the period to the end of September.

Unfortunately, this is not terribly useful as both the Halifax and Nationwide showed prices climbing again in October.

This led the Bank of England to raise interest rates last week. What will be really important is the reaction of the 1.8m first time buyers who are now experiencing their first increase in mortgage rates - as Abbey and Halifax reminded them on Monday.

That could deliver a pyschological jolt. If it does then the Bank may well be able to hold off on raising interest rates again, given that factory gate inflation remains subdued.