Chairman's Statement

BSkyB ANNUAL GENERAL MEETING

James Murdoch

22 October, 2010

Chairman's Statement

INTRODUCTION

A very good morning to you all. Welcome to the 22nd Annual General Meeting of British Sky Broadcasting. Thank you for coming.

Alongside me today is your Board of Directors.

On my right is Dave Gormley, our Company Secretary, and from his right in turn are Nick Ferguson, Andrew Griffith, Allan Leighton, Dame Gail Rebuck, Arthur Siskind and Lord Wilson of Dinton. Immediately on my left is Jeremy Darroch, followed by David Evans, Jacques Nasser, Thomas Mockridge, Daniel Rimer and David DeVoe.

Due to a family bereavement, Andrew Higginson is unable to attend this morning's meeting and has asked me to pass on his apologies.

Before we move on to the formal business of the meeting, let me take just a few moments to reflect on the past year.

BUSINESS UPDATE

As you know, the business climate has been dominated by the deepest recession in a generation. And few organisations can say they are on track to emerge from the downturn in better health than before. Our company can.

Despite pressure on household budgets, more people are choosing Sky - and choosing to take more from us. On average, we attracted over 1,000 new customers every day in the course of the year. We also sold an additional 3.6 million subscription products; deepening our relationship with families across the country.

In particular, our investment in high definition is bringing great rewards. HD is now in almost one in three of our customers' homes, with penetration more than doubling for the second successive year.

We also remain the UK's fastest growing provider of home communications. Our first quarter results announced today show record combined growth in broadband, talk and line rental. And now more than one in five of our customers take all three of TV, broadband and telephony.

But, of course, the main reason customers join Sky is still for a better choice of TV viewing. So bringing them the best content remains central to our strategy. And in the past 12 months we have continued to develop our offering: forging a partnership with HBO - one of the most renowned names in television production; stepping up our commitment to UK programming in drama, comedy and the arts; and expanding our portfolio of channels with the acquisition of Living TV Group.

Strong demand from customers - together with greater operational efficiency - has once again delivered good financial results. Last year saw double-digit growth across the board: evidence that our strategy is working and delivering accelerating returns.

Group revenue rose by 11 per cent to £5.9 billion, while adjusted operating profit was up 10 per cent to £855 million. Such success is, I believe, powerful testament to three things that set Sky apart.

First, our relentless focus on the customer - making sure we constantly improve the value, quality and range of what we offer.

Second, the strength of the subscription model, which has proven to be resilient to difficult economic conditions.

And third, our approach to business: taking risks; innovating and investing for the long term; and competing vigorously and fairly.

Everyone associated with Sky - our shareholders and our colleagues alike - should take pride that, at quarter end, we were close to signing up our 10 millionth customer. This is a significant milestone; one that most observers long presumed was beyond reach. It is a forceful demonstration of our company's appetite for change.

Sky is - and always has been - a force for progress. It has brought choice and competition to the marketplace. It has pushed boundaries with continuous innovation. It has contributed to the diversity and plurality of British media. And it has invested in quality journalism with a deserved reputation for editorial independence. In doing so, it has brought many positive benefits for customers. I have no doubt that this contribution will continue and grow over time.

CHALLENGES AHEAD

But our achievements must not distract from some significant challenges that lie ahead.

The economic outlook, of course, remains volatile. Necessary cuts in public spending - coupled with higher taxes - are likely to affect consumer confidence and household expenditure.

There remains too a concern about regulatory interference. This year saw an unprecedented and in our view unwarranted intervention from Ofcom in relation to our premium sports channels. We are appealing and we will continue to fight for a business environment that promotes investment, innovation and competition. That, we believe, is what delivers for customers, shareholders and citizens alike.

Our company also operates in a highly competitive and dynamic marketplace. We remain alive and responsive to such challenges. First and foremost that means maintaining our commitment to customers.

THE BIGGER PICTURE

Part of that is having a strong sense of responsibility in the way we do business. Last year again saw strong progress in those areas where we can best exploit our resources and expertise to make the most difference.

On the environment, we have set challenging new targets to cut our own carbon emissions. And Sky Rainforest Rescue - our partnership with WWF - is on track to meet our goal of raising £4 million and, in turn, help to save a billion trees in the Amazon.

In sport, more than 200,000 adults and children took part in Sky Ride, our traffic-free cycling events, while the Sky Sports Living for Sport scheme signed up its 1,000th school.

And in the arts, our relationships with English National Ballet and the Hay Festival have continued to prosper alongside our partnership with Artichoke, the UK's leading public art producer, which delivered a number of exciting projects this year.

NEWS CORP

Now, I do want to touch on one final issue.

As shareholders are aware, in June, News Corporation - where I am an Executive Director - approached the Board with a proposal that could lead to a future offer to take full ownership of Sky. A regulatory process is under way and there is no further update on that process today.

I wish simply to add two points. The Sky management team remains fully focused on executing its priorities and increasing returns. And News Corporation remains a committed shareholder, fully supportive of the management team and the staff.

CONCLUSION

Indeed, I would like to take this opportunity to thank all our colleagues at Sky for their passion, dedication and hard work on behalf of customers and the business throughout the year. Our success is built on their talent, expertise and enthusiasm.

Equally, I would also like to thank you - our shareholders - for your continued support.

Moving on the next item on our agenda this morning, I will now hand over to our Deputy Chairman, Nick Ferguson, who will open the meeting to your questions.