Exhibit 6 Sky Television Financial Forecast

1989 1990 1991 1992 1993Average Dish HH 0.93 1.89 2.85 3.81Average Cable HH 0.70 0.80 1.00 1.30Sky's share of NEW customers 0.85 0.70 0.60 0.50Sky Dish HH 0.79 1.46 2.04 2.52Sky Cable HH 0.60 0.67 0.79 0.94Discount rate 10.00%

RevenuesFilm [£120×65%×Dish HH] £114 £159 £196Cable [£42×Cable HH] £28 £33 £39Advertising [£20×(Total HH + SMATV)] £53 £66 £79Total Revenue £124 £195 £258 £315

CostsSub Mgmt [25%×Film Rev] £29 £40 £49All Other £220 £220 £220Total Costs £249 £260 £269

EBIT £54 £1 £46EBIT×[1 – %Tax] £38 £1 £32Depreciation £5 £5 £5Working Capital [10%×Rev] £7 £6 £6Capex £8 £8 £8Cashflow £47 £10 £24

1994 1995 1996 1997 1998 19994.77 5.73 6.69 7.65 8.61 9.571.80 2.30 2.70 3.10 3.50 3.900.50 0.50 0.50 0.50 0.50 0.503.00 3.48 3.96 4.44 4.92 5.401.19 1.44 1.64 1.84 2.04 2.24

£234 £271 £309 £346 £384 £421£50 £60 £69 £77 £85 £94£94 £108 £122 £135 £149 £163

£377 £440 £499 £559 £618 £678

£58 £68 £77 £87 £96 £105£220 £220 £220 £220 £220 £220£278 £288 £297 £307 £316 £325

£99 £152 £202 £252 £302 £352£69 £106 £141 £177 £212 £247

£5 £5 £5 £5 £5 £5£6 £6 £6 £6 £6 £6£8 £8 £8 £8 £8 £8

£60 £98 £133 £168 £203 £238

Exhibit 7 British Satellite Broadcasting Financial Forecast

1989 1990 1991 1992 1993 1994Average Dish HH 0.93 1.89 2.85 3.81 4.77Average Cable HH 0.70 0.80 1.00 1.30 1.80BSB's share of NEW customers 0.15 0.30 0.40 0.50 0.50BSB Dish HH 0.14 0.43 0.81 1.29 1.77BSB Cable HH 0.11 0.14 0.21 0.37 0.62Discount rate 10.00%

RevenuesFilm [£120×65%×Dish HH] £33 £63 £101 £138Cable [£42×Cable HH] £6 £9 £15 £26Advertising [£20×(Total HH + SMATV)] £21 £31 £43 £58Total Revenue 30 £60 £103 £159 £222

CostsSub Mgmt [25%×Film Rev] £8 £16 £25 £35All Other £365 £365 £365 £365Total Costs £373 £381 £390 £400

EBIT £313 £278 £231 £178EBIT×[1 – %Tax] £219 £195 £162 £124Depreciation £50 £50 £50 £50Working Capital [10%×Rev] £3 £4 £6 £6Capex £15 £15 £15 £15Cashflow £187 £164 £132 £96

1995 1996 1997 1998 19995.73 6.69 7.65 8.61 9.572.30 2.70 3.10 3.50 3.900.50 0.50 0.50 0.50 0.502.25 2.73 3.21 3.69 4.170.86 1.07 1.27 1.46 1.66

£176 £213 £250 £288 £325£36 £45 £53 £62 £70£72 £86 £100 £113 £127

£284 £344 £403 £463 £522

£44 £53 £63 £72 £81£365 £365 £365 £365 £365£409 £418 £428 £437 £446

£125 £75 £24 £26 £76£87 £52 £17 £18 £53£50 £50 £50 £50 £50

£6 £6 £6 £6 £6£15 £15 £200 £15 £15£58 £23 £173 £47 £82

BSBFight Exit

Fight , ,

Exit , ,

Assignment:Use the assumptions below to calculate the NPV of each cell in the payoff matrixNote that you will have to calculate 3 different NPVs for each company

Assumptions:1. Figures are in millions of British Pounds. No inflation adjustment is necessary.2. The first figure in each box applies to Sky, the second to BSB.3. Losses through 1990 are a sunk costs and have been ignored.4. The discount rate used in calculating NPV is 10%.5. Cash flows after 1999, if any, are treated as perpetuity (i.e., they are set equal to those of 1999 and discounted).6. If one player concedes right away (exits), it still incurs losses in 1991 and then exists the market (has 0 costs and revenues from 1992 onwards).7. If one player concedes right away (exits), the other player monopolizes all the market starting in 1992.8. If both companies stay in (fight), in 1991 and 1992, SKY is assumed to get, respectively, 70% and 60% of all NEW customers.8. If both companies stay in (fight), they are assumed to get an equal number of NEW customers in 1993 and thereafter.9. Otherwise, model assumptions reflect the financial forecasts (Exhibits 6&7).

SKY TV

5. Cash flows after 1999, if any, are treated as perpetuity (i.e., they are set equal to those of 1999 and discounted).6. If one player concedes right away (exits), it still incurs losses in 1991 and then exists the market (has 0 costs and revenues from 1992 onwards).7. If one player concedes right away (exits), the other player monopolizes all the market starting in 1992.8. If both companies stay in (fight), in 1991 and 1992, SKY is assumed to get, respectively, 70% and 60% of all NEW customers.8. If both companies stay in (fight), they are assumed to get an equal number of NEW customers in 1993 and thereafter.