For those that missed the article on Little Miss Murdoch and her plans for Sky in last week's Independent, read on:

There is a frightening spectre stalking the corridors of ITV, the BBC, Channel 4 and Channel 5. This shadow in the hearts of commissioning editors takes the form of a blonde with an American accent brandishing a very fat cheque book.

The name given to this image is Liz, but she is more formally known as Elisabeth Murdoch, director of programmes and general manager of BSkyB and, of course, daughter of Rupert.

The reason for the fear is her stated aim to start making her own programmes, and with that the worry that she could do to the price of TV talent what Sky has already done to the price of sports rights.

The precedent is terrifying. In 1986 the BBC and ITV paid £6.2m to the Football League for a three-year television contract for first-division (as was) football. Ten years later the price of a four-year deal with the Premier League had risen to £670m. Paid for by Sky. Rugby, golf, overseas cricket have all gone the same way - through the roof. And now terrestrial broadcasters are fiddling nervously with their budgets.

Last week Ms Murdoch signed a £3m deal with Chris Evans for Sky to sponsor his breakfast show. This was an uncommonly large figure for a radio sponsorship deal. Until you understand that the second part of the deal is for Evans's Ginger Media Group to come up with programming ideas for Sky.

On top of this Ms Murdoch has been trying to buy into some of the country's hottest independent production companies, such as Hat Trick - maker of a string of comedy hits - and Tiger Aspect, another entertainment specialist.

"We need to be rights holders, not just rights leasors," Ms Murdoch told the media analyst Mathew Horsman, when he was writing his recent book, Sky High. "Right now we rent programming and if we make it work, and we usually do because of our talent for marketing, the next time you go back it has tripled in price. So we very much recognise that we need to participate in the food chain."

This is the supply-side argument for what Sky is planning. The demand side argument is more complex.

"I doubt if one person will buy a dish to get Sky One," says Dawn Airey, programming director of Channel 5. "Entertainment channels haven't driven distribution of pay-TV in any other market."

The wisdom is that people have only ever been willing to pay for TV to get sports, movies and sex.

"No one has ever been able to test this hypothesis, because all the high-quality original programming is on free terrestrial television," says Horsman, media analyst at the bankers Henderson Crosthwaite. "But the most successful non-Sky channel on pay-TV is UK Gold. Which shows that people are willing to pay for repeats of high-quality domestic programmes."

Horsman believes that up to now Sky's revenues have leapt up because of its ability to charge subscribers more. Now that its sports and movies packages are hitting £30 a month, it can no longer continue to use this as a way of growing its income.

Instead it may use a popular mass entertainment channel mixed with some sports and some movies to create several tiers of pricing to attract more new subscribers.

The channel won't unbundle its packages, as hoped for by the cable industry and consumer groups, but it may "re-tier" them.

And Ms Murdoch is also looking to a future when Sky One may not even seem like a pay-TV channel. Digital distribution is expected to put Sky in 50 per cent of homes by 2002. By 2010 it could be in 75 per cent of homes, and will be a mass distribution channel supported by advertising, not subscriptions - a thought that should strike fear into the heart of ITV.

In America Rupert Murdoch built the Fox Network on the back of cutting-edge humour such as The Simpsons and Married with Children. These programmes shook up the "hugging and learning" world of US sitcoms and brought in a valuable younger audience. They all get a good airing on Sky One now, but TV industry experts don't believe they are enough.

Despite the current hyping of first-run acquisitions such as ER and Friends, Sky will need its own programmes to go mass market. "TV is no longer as it was in the Seventies and Eighties, when Charlie's Angels or Dallas delivered huge audience shares," says Airey. "ER and Friends do OK on niche channels, but they won't do the business on mass channels. That's where you need original domestic programmes."

The kind of original programmes Sky will chase is obvious enough when you look at its current audiences, its deal with Ginger, and its efforts to woo Hat Trick.

"They need to bag that 25-to-40 year old demographic," says David Docherty, the BBC's deputy director of television. "They don't need mainstream entertainers. Someone like Harry Enfield would be an iconic figure for them to go for." And not just Sky.

David Liddiment, ITV's new head of programmes, has promised advertisers the channel will increase the number of young viewers, and has already poached Frank Skinner and David Baddiel. Channel 5 wants a hip young comedy image, if it can afford it, and the whole genre is practically Channel 4's invention. A battle may be about to start in which the only winners are likely to be those who can make us laugh.

Docherty has confirmed that the BBC has budgeted for an increase in the cost of talent as a percentage of production costs in the short term, despite John Birt's assertion, in a speech last year, that the corporation would not enter bidding wars.

But Docherty does not

expect Sky to do to the price of comedians what it did to the price of sport: "Understand that in sport we are talking about the Premier League, it's the one that drives the entire market," he says. "But while there is always potentially another Harry Enfield to be found, there is no way of getting another Premier League."

Horsman agrees: "The terrestrial channels spent around £1.5bn on programming last year. That is more than Sky takes in revenues and can be compared with £130m they spend annually on the Premier League. OK, that may be Channel 5's entire budget, but its only one-fifth of ITV's spending."

Horsman also believes that rather than overall TV production costs rising to pay for talent, the "talent"may get just get a bigger share of the budget by controlling more of the production.

"Chris Evans has made more money from overseas sales of Don't Forget Your Toothbrush than he has from programme fees," says Airey. And it is a model that others will follow: owning the shows, the ideas and the production company to make sure the talent gets a bigger slice of the cake.

So rather than the sky falling in on them, and the price of talent soaring through the roof, some terrestrial broadcasters expect to see the satellite channel make just a few high-profile programme acquisitions. Maybe a Harry Enfield here, a Mrs Merton there, but in the end it will amount to marketing. Each new star will be accompanied - as ER and Friends are at the present time - by a mammoth advertising campaign that is designed not to drive viewers to the show, but to sell dishes or digital set-top boxes.

Each original show will be milked as only Sky knows how - aired three times a week, perhaps. In the end it may be that the billboard advertising companies make more out of Sky than even a Harry Enfield.

(c) Independent