British Sky Broadcasting Group plc: Results for the Year Ended June 30, 2000.

Business Editors

LONDON--(BUSINESS WIRE)--July 26, 2000

British Sky Broadcasting Group plc (NYSE: BSY), the UK-based pay-television broadcasting group, today announced its results for the year ended June 30, 2000.

Record Growth Of Over One Million DTH Subscribers

-- Increased investment in Open to 80.1%

-- New customer relationship management center in Manchester

-- Digital sales as at July 25 reach 3.8 million

-- Increased investment in Open to 80.1%

-- New customer relationship management center in Manchester

-- Revenue increases by 20% to(pound)1,847 million ($2,793 million)

-- Increased investment in Open to 80.1%

-- New customer relationship management center in Manchester

-- WML-based internet browser to be introduced to existing set top

box

-- Increased investment in Open to 80.1%

-- New customer relationship management center in Manchester

Tony Ball, Chief Executive of British Sky Broadcasting Group plc, said:

"It has been a year of delivery. A phenomenal digital take up rate has given Sky a substantial lead over its competitors and keeps us on target to deliver 5 million subscribers by the end of 2000.

"Sky continues to extend its excellence in interactive news, sports and entertainment services. Sky will compliment and enhance Open services by introducing a WML-based internet browser into the existing digital set-top box, which will allow Sky to offer e-commerce and information across all its television channels.

"Sky has built a digital platform on which many different revenue creating services can be delivered. Pay television is merely the first. Sky will continue to innovate and develop new services that drive new revenue streams and enhance customer loyalty."

There will be a presentation to analysts and investors at 9:30 a.m. today at The Gibson Hall, 13 Bishopsgate, London, EC2 and to press at 11.30 a.m. at the same venue.

A conference call for analysts will be held at 3.00 p.m. (BST) / 10.00 a.m. (EST) today. To register for this, please contact Emma Kent at Bell Pottinger Financial on [phone] (UK & Europe) or David Chang at Taylor Rafferty on [phone] (US & Asia).

A webcast of the analyst presentation, together with this press release will be available from 2.00 p.m. (EST) today on Sky's corporate website which may be found at http://www.sky.com/corporate/ and, to subscribing institutions only, via the Raw Communications network.

BSkyB ADRs (each equal to six ordinary shares) trade on the New York Stock Exchange under the symbol BSY. BSkyB ordinary shares are listed on the London Stock Exchange, and can be accessed on Reuters under the symbol BSY.L, and on Quotron and Bloomberg under the symbol BSY. Additional information is available on BSkyB's home page: http://www.sky.com.

Business Review

Distribution

The total net subscribers to Sky's channels increased by 1.5 million to 9.0 million in the year to June 30, 2000 (`the year') and by 365,000 in the quarter ended June 30, 2000 (`the quarter').

Direct to home subscribers (`DTH') increased by a record 1,053,000 in the year with the previous highest annual net growth being 680,000 six years ago. Net DTH growth in the quarter was 357,000.

Over 18% of UK homes now subscribe to Sky. At June 30, 2000 there were 3.6 million DTH subscribers to the digital service and 930,000 DTH subscribers to the analogue service. Almost 80% of Sky's DTH subscribers are now taking the digital service. As at July 25 digital sales to date were 3.8 million. Total DTH churn fell to 10.5% (1999: 13.4%). This reflects the low rate of churn in digital at 3.5% (1999: 2.1%) and the fact that the majority of DTH subscribers are now on the digital platform. The Group is confident that its aim of reducing the long term churn rate below 10% will be achieved.

The average revenue per DTH subscriber (subscription and PPV) in the year was (pound)287 ($434), an increase of (pound)18 ($27) on last year. The total DTH pay to basic ratio was 282%, higher than expected given the growth in subscribers added in the period. It remained some 166 percentage points higher than that in cable (116%) and 175 percentage points higher than that estimated for ONdigital (107%). Almost 60% of Sky digital DTH subscribers continue to take all Sky's premium channels.

Transition to digital - expected to be completed by June 2001

The success of the transition of analogue DTH subscribers to digital has exceeded the Group's expectations. When Sky digital was launched in October 1998 it was envisaged that its analogue customers would be transitioned by, at the earliest, December 2002 and commitments were made accordingly.

With almost 80% of DTH subscribers now receiving the digital service the Group has decided to cease offering its current analogue service in June 2001, realizing significant cost savings and strategic benefits. All existing analogue subscribers will remain entitled to the current free set top box promotion.

A new priority for Customer Service

During the first half of the year, the Group focused on handling the record volumes of new and existing customers requesting Sky digital. Investment made at that time in recruitment and training led to second half improvements with the average cost per call handled down by 17%, and the number of calls cut by half.

The Group announced in February that it would invest in improving customer service, achieving greater efficiency and the ability to support a wider range of products and services, by investing in a new customer relationship management center and upgrading the existing centers in Livingston and Dunfermline. The new center with 500 seats will be located near Manchester and is expected to be operational in early 2001.

Sky In Home Service ("SHS"), the domestic installation arm of Sky, is also being restructured, with sub-contractor Exel appointed to open a new national equipment distribution center in Sheffield replacing 15 smaller distribution centers around the UK. The resulting distribution network will be more flexible and scalable, and produce ongoing savings of (pound)4 million per annum.

Taken together these changes will provide Sky with the infrastructure to allow it to extend its current relationship, as supplier of TV services to 4.5 million DTH customers, into multiple services and products.

Programming

The year saw an increasing amount of original content shown on the movie and entertainment channels, the successful launch of Sky Sports Active and Sky News Active and the renewal of a number of important sports rights. The renewed Premier League contract recognizes the value of interactive services which can be built around the on-screen content such as impulse purchases, sales of merchandise and betting.

Sky Sports has had a successful year with the launch last August of Sky Sports Extra and the rebranding of Sky Sports News as Sky Sports.comTV. Interactive coverage of football has proved to be hugely popular and this service was extended during the year to rugby for the 'Six Nations Championship' and to cricket for the second test against Zimbabwe.

Sky Sports also secured the rights to the next two Ryder Cup Matches, four more years of the European Golf Tour and the Solheim Cup. Rights deals were signed with the Australian and West Indies Cricket Boards.

In movies the average share of viewing across our movie channels increased on prior year, driven by the popularity of the multiplexed versions of the channels in digital DTH homes.

Sky Pictures launched successfully in November with 'Tube Tales'. Since then five films have been released. Some titles have been given their first exhibition on Sky whilst others have received high profile UK theatrical releases. One film, 'Saving Grace' won the prestigious World Cinema Audience Award at the Sundance Film Festival.

Sky One continues to be the highest rating non-terrestrial entertainment channel in satellite and cable homes. Throughout the year Sky One has consistently achieved a larger viewing share, in cable and satellite homes, than Channel 5.

Sky News has continued to outperform competitors, winning various awards during the year, including 'The Royal Television Society's' News Event Award for the reporting of the Kosovo conflict. In June 2000 Sky News successfully launched the world's first digital enhanced news service.

Improvements to Sky's digital platform

Sky has built a digital platform on which many different revenue creating services can be delivered. Pay television is merely the first. Sky will continue to innovate and develop new services that drive new revenue streams and enhance customer loyalty.

The next stage in the development of Sky digital will be the launch of a digital interactive text service, `Sky Text', in October which will provide an array of information and entertainment services.

This autumn Sky will pioneer the introduction of personal video recorders (`PVR') both in partnership with TiVo and with the Group's integrated PVR set top box later in the year. Both devices will be marketed as premium products competing against high specification video and DVD recorders, and the Group does not intend to subsidize the hardware. Demand for the TiVo service is expected from existing cable, DTT and satellite subscribers and non-subscribing households, representing a new opportunity for the Group to reach non-Sky subscribers.

New Media

Sky's New Media strategy is to develop and distribute our content across multiple devices and platforms and monetise the traffic through e-commerce, advertising and subscription. The last six months have seen the foundations laid for this strategy through building infrastructure, investing in e-commerce opportunities and developing the breadth and depth of content both organically and through acquisition.

Already Sky provides news, sports and entertainment services both via digital television as well as via our portals Sky.com and Skysports.com on the PC and from today Sky begins distribution of news and sports content on the Orange mobile portal. Combined, Skysports.com, Sky.com and Sports Internet have approximately 70 million monthly page impressions.

Surrey Sports, acquired as part of Sports Internet Group, has provided Sky with an established betting infrastructure. This has been enhanced through the recent launch of online betting with TV and mobile internet betting applications being developed for launch later in the year. In the next 12 months this rapidly growing business is expected to generate over (pound)100 million in revenues.

In October 1999 Open.... was launched, and in just nine months Open.... has become the largest television-based e-commerce platform in the UK with over 900,000 registered e-mail users and access to over 9 million people through television sets in over 3.5 million homes. On July 17, 2000 Sky announced that it had reached agreement to increase its stake in Open.... from 32.5% to 80.1%, BT retain 19.9%. The agreement is subject to regulatory approval.

Sky plans to include a WML (Wireless Markup Language) based internet browser into every existing digital set-top box giving all subscribers access to a secure environment containing internet content--for example chat, games, shopping, betting and e-mail services. No additional hardware is required. This browser will allow Sky Text to offer e-commerce and information across all of its television channels. This will complement and enhance Open's services. These developments will increase the range of retailers and improve the look and feel of interactive services and will make e-commerce through the TV a mass-market reality.

Sky have announced the creation of Skysportsstore.com, Sky's first end-to-end retail commerce venture which will launch in autumn 2000. By developing the strengths of the Sky Sports brand, it will aim to become Britain's leading sports e-tailer carrying the most comprehensive inventory.

The Group has also concluded strategic partnerships with and investments in e-commerce partners, including Streets Online, gameplay and MyKindaPlace.com. These deals allow Sky to share the benefit that these providers derive from their relationship with Sky and to build long term relationships.

BOARD

Dame Anne Mueller retired from the board as a non executive director in April after 9 years of service. Dame Anne Mueller made an outstanding contribution to the Company over many years and the board is saddened to report her death on July 8, 2000.

On June 30, 2000, Elisabeth Murdoch, Managing Director of Sky Networks and an alternate director of BSkyB, left the Company to set up her own venture. Elisabeth Murdoch has been pivotal in the Group's creative development. The board wishes her every success with her new venture.

Financial Review

The record growth in DTH subscribers over the past 12 months has meant that, whilst revenues continued to grow, significant subscriber acquisition costs have impacted operating profit before exceptional items, which was down 54% at (pound)85 million ($129 million). The loss before tax and exceptional items of (pound)142 million ($215 million) was (pound)215 million ($325 million) lower than last year, principally due to reduced operating profits, a (pound)55 million ($83 million) increase in our share of the losses of British Interactive Broadcasting Limited ("BiB") and, subsequent to the acquisition of 24% of KirchPayTV in April 2000, our share of KirchPayTV's losses of (pound)11 million ($17 million). After exceptional charges of (pound)120 million ($182 million), the Group recorded a loss before tax of (pound)263 million ($397 million).

Turnover

Turnover grew by 20% to (pound)1,847 million ($2,793 million), with growth in all areas.

Subscriber revenues, which account for 81% of total turnover, grew 21% year-on-year. DTH revenue, which accounts for 64% of total turnover, increased by 21% to (pound)1,189 million ($1,798 million), reflecting a 13% increase in the average number of subscribers and a 7% increase in average revenue per subscriber. The digital DTH pay to basic ratio at the year end of 285% was 14% points above the analogue DTH ratio of 271%. Wholesale revenue from cable and DTT subscribers rose 20% to (pound)303 million ($458 million), mainly reflecting a full year's revenue from ONdigital.

Advertising revenue increased by 12% to (pound)242 million ($366 million), driven by increased rates and greater penetration of Sky channels in UK homes, which stands at 34% (1999: 30%). Sky's share of viewing in multi-channel homes during the year was 13.4% (1999: 13.7%).

Programming Costs

Programming costs increased to (pound)946 million ($1,431 million), reflecting the growth in the number of subscribers, and the continued increase in programming, both original and acquired, which is now available on the digital platform.

Sports costs, which represent 41% of total programming costs (40% in 1998/99), increased by (pound)67 million ($101 million) to (pound)385 million ($582 million), driven by an increase of (pound)46 million ($70 million) in football costs, (mainly UEFA Cup rights and contractual increases in Premier League costs), together with the costs of the Ryder Cup and cricket rights.

An increase in movie costs of 17% ((pound)40 million) ($60 million) to (pound)278 million ($420 million), reflected the increased number of movies offered and a higher average number of movie subscribers.

Entertainment programming costs increased by 13% ((pound)8 million) ($12 million) to (pound)66 million ($100 million), reflecting increased investment in commissioned programming (which accounted for 32% of Sky One costs) and increased licensed programming costs due to more first run shows and higher rights costs for popular US series.

DTH distribution fees paid to third party channels rose by 27% ((pound)38 million) ($57 million) to (pound)177 million ($268 million), due to the increased number of total subscribers and the increased number of channels available to digital subscribers compared to analogue.

Other Operating Costs

Marketing costs increased by (pound)166 million ($251 million) (77%) to (pound)381 million ($576 million), due mainly to the inclusion of the costs of the free set-top box promotion following the substantial increase in new subscribers.

Subscriber-related costs (mainly subscriber handling and smartcard costs) increased by 29% to (pound)200 million ($302 million), driven by the increased number of staff required to handle greater call volumes and the costs of issuing smartcards to new subscribers. Transmission and related costs rose by (pound)14 million ($21 million) to (pound)105 million ($159 million), as the result of the cost of leasing 8 new digital transponders to support the expanding service during the year, partly offset by savings from reduced analogue operations.

Overheads increased by (pound)17 million ($26 million) to (pound)130 million ($197 million) due mainly to growth in staff to support a larger and more complex group and a full year's depreciation on digital assets.

Exceptional Operating Items

Operating exceptional items of (pound)105 million ($159 million) comprise a (pound)41 million ($62 million) provision for early termination of the current analogue service, a (pound)58 million ($88 million) increase in the transition provision and (pound)6 million ($9 million) of costs for the reorganization of SHS. In May 1999, the Group had announced a marketing promotion under which it committed to transitioning its existing analogue subscribers onto its digital service. This did not include subsidy costs provided by BiB, 32.5% of whose funding was met by the Group. Following the acquisition by the Group of a further 47.6% shareholding in BiB and the consequent agreement for the Group to provide 100% of BiB's funding, it became appropriate to increase the provisions by (pound)58.3 million ($88.2 million), principally to provide for the costs of subsidizing the set-top box for the remaining analogue subscribers.

The Group's share of KirchPayTV's loss on sale of fixed asset investments of (pound)14 million ($21 million) is also included as an exceptional item.

Joint Ventures

The Group's share of net operating losses from joint ventures increased from (pound)58 million ($88 million) to (pound)121 million ($183 million), mainly due to its investments in BiB and KirchPayTV. The Group's share of BiB's operating loss increased by (pound)55 million ($83 million) to (pound)99 million ($150 million), in line with the rapid growth in digital set-top box sales. The Group's share of KirchPayTV's operating loss, an amount of (pound)11 million ($17 million), was included for the first time following the acquisition of our 24% stake in April 2000, as was related goodwill amortization.

The Group continues to invest in its programming joint ventures with losses reducing by 16% during the year to (pound)11m.

Interest

Net interest costs of (pound)92 million ($139 million) increased by (pound)32 million ($48 million) compared to the prior year, due to an increase in average borrowings, and an increase in average interest rates.

Taxation

As the result of losses in the year, the Group has no liability to UK taxation. The tax benefit of these losses amounting to (pound)76 million ($115 million) has not been recognized in the accounts. The (pound)9 million ($13 million) tax charge arises from the effect of paying for tax losses of joint ventures without being able to benefit from losses acquired until future years. Estimated tax losses carried forward of (pound)551 million ($833 million) are available to shelter future taxable profits.

Cash flow

Significant growth in the number of digital subscribers following the free set-top box promotion impacted operating cash flows, which decreased by (pound)471 million ($711 million) creating an outflow of (pound)233 million ($352 million). Combined with investment in new media ((pound)27 million) ($41 million), purchase of stakes in football clubs ((pound)21 million) ($32 million), net interest paid ((pound)65 million) ($98 million) and capex ((pound)58 million) ($88 million), this resulted in a (pound)480 million ($726 million) increase in net debt during the year, to (pound)1,145 million ($1,731 million) at June 30, 2000. The capital expenditure of (pound)58 million ($88 million) related to continued investment in digital technology and enhanced/interactive services, subscriber management and advertising systems. The acquisition of a 24% interest in KirchPayTV was funded by the proceeds of a share placing and the issue of 78 million shares in the Company to KirchPayTV.

Outlook

During the next 12 months we will complete the transition to digital, create our new generation customer relationship management center and enhance our customer proposition by creating new multi-platform services, all of which will drive subscriber growth and revenue per subscriber.

Subscribers to Sky Channels

----------------------------------------------------------------------
                     Opening             Q1                Q2
                  As at 6/30/99     As at 9/30/99    As at 12/31/99

Digital            753,000          1,279,000        2,065,000
Analogue         2,707,000          2,303,000        1,901,000
                 ---------          ---------        ---------

DTH              3,460,000          3,582,000        3,966,000
Cable            3,189,000          3,325,000        3,306,000
ONdigital          204,000            363,000          527,000
Eire               589,000            591,000          605,000

Total            7,442,000          7,861,000        8,404,000
----------------------------------------------------------------------

                              Q3                Q4
                         As at 3/31/00     As at 6/30/00

Digital                    2,751,000         3,583,000
Analogue                   1,405,000           930,000
                           ---------           -------

DTH                        4,156,000         4,513,000
Cable                      3,211,000         3,122,000
ONdigital                    647,000           740,000
Eire                         609,000           613,000

Total                      8,623,000         8,988,000

ONdigital figures as per public announcement
----------------------------------------------------------------------

Sky DTH Subscribers

----------------------------------------------------------------------
1999/2000        Quarter 1         Quarter 2        Quarter 3
                  3 m to             3 m to           3 m to
                  9/30/99           12/31/99          3/31/00

Opening          3,460,000          3,582,000        3,966,000
Net additions      122,000            384,000          190,000
Closing          3,582,000          3,966,000        4,156,000

Churn (YTD)          14.2%              11.9%            12.7%
----------------------------------------------------------------------

1999/2000              Quarter 4           Year
                     3 m to 6/30/00   12 m to 6/30/00


Opening                 4,156,000        3,460,000
Net additions             357,000        1,053,000
Closing                 4,513,000        4,513,000

Churn (YTD)                 10.5%            10.5%

----------------------------------------------------------------------

Sky digital additions

----------------------------------------------------------------------

1999/2000          Quarter 1         Quarter 2        Quarter 3
                    3 m to             3 m to          3 m to
                    9/30/99           12/31/99         3/31/00

New                244,000            455,000          316,000          388,000
         1,403,000
Transitions        287,000            341,000          398,000          477,000
         1,503,000

New as % of gross      46%                57%              44%
additions
----------------------------------------------------------------------

1999/2000                  Quarter 4             Year
                         3 m to 6/30/00     12 m to 6/30/00


New                          388,000          1,403,000
Transitions                  477,000          1,503,000

New as % of gross                45%                48%
additions

Note: For tabular results, please contact Taylor Rafferty at 212/889-4350