Sky Anytime? Not For Virgin Media Cable Homes
Shortly after midnight last night, around three million Virgin Media cable homes tuned in to Sky’s basic channels saw their transmission cease, after talks between the two companies broke down.
Sky had increased the fees for channels such as Sky One and Sky News, and Virgin said it refused to pay the amount, which, according to Virgin, is said to have been almost double its original fee.
The withdrawal is limited to Sky’s basic channels, which also include Sky Two, Sky Three and Sky Sports News, with their sport and movies channels still available to Virgin Media’s customers.
In a statement, Virgin Media has said that the popularity of Sky’s basic channels has declined by 20% in the past three years. Richard Branson’s company is insisting that its customers will benefit, as Virgin invests the extra money it would have paid to Sky to build on a series of major programming acquisitions in the following months.
However, for at least the short-term, both Virgin Media customers and Sky appear to have lost out in the battle, with Sky standing to lose millions in revenue from Virgin, and Virgin customers being cut-off in the middle of seasons of hit shows such as Lost, 24 and Battlestar Galactica.
Sky has admitted that in the four months until the end of its financial year in July it is set to lose £15 million to £20 million now its basic channels have been pulled from Virgin Media’s network. Sky could stand to lose as much as £60 million over the course of a year.
Some Virgin customers could potentially migrate to platforms like Freeview for some of the Sky channels they have now lost (although some are shortly due to be removed from there also), or even switch to Sky itself – perhaps convinced in part by heavy handed marketing tactics from Team Murdoch.
In Virgin’s statement, it said: “Throughout the dispute, Virgin Media has made continued efforts to reach an agreement with Sky. On Tuesday evening, after a breakdown in discussions, we offered to let an independent expert that both sides could trust take a dispassionate look at the facts and decide what was fair and reasonable.
“Sky formally rejected this offer on Wednesday morning and again on Wednesday afternoon following a personal call to James Murdoch, instigated by Virgin Media’s Chairman Jim Mooney and CEO Steve Burch.”
Burch said: “We’re disappointed but not surprised by this outcome – nothing Sky have said or done in the course of the negotiation indicates they had the slightest interest in doing a commercially viable deal. Their action here is consistent with their plans to withdraw their free channels from Freeview and, in our view, reflects their desire to limit consumer choice.”
Richard Branson added: “We’re sorry that Sky have pulled their basic channels from our service. These however do not include their sports and movie channels, which will continue to be available to Virgin Media’s customers. When Virgin Media launched last month, we promised to put the power of the entertainment industry back in the hands of UK consumers, giving them the service they deserve and the value they’d expect.
“Consumers have my whole-hearted assurance that Virgin Media will not allow this dispute to prevent us from giving them the freshest and most exciting TV service in the UK. With Virgin Central and our massive library of on-demand programming, there’s a lot to look forward to.”
In a statement, a spokesman for Sky said: “We know that Sky’s basic channels have many loyal cable viewers and our aim has been to avoid any disruption to their enjoyment of our programmes. We’re disappointed that we will now be denied access to cable TV homes.
“We’ve made repeated efforts to reach an agreement but Virgin Media has rejected all of our proposals – including our latest offer of just 3p per customer per day.
“To ensure that Virgin Media’s customers would continue to enjoy access to our channels, Sky even offered to retail them directly to customers on the Virgin Media Network. This proposal was also dismissed by Virgin Media.
“Six frustrating days have passed since Virgin Media last put forward financial terms for a proposed agreement to Sky. As late as yesterday, Virgin Media declined to re-enter negotiations of financial terms and confirmed that it did not intend to make a new offer of financial terms to Sky.
“Sky stands by the value of its basic channels. Millions of customers count on Sky to invest on screen. We understand that it’s an important part of attracting and retaining customers. If Virgin Media decides that it wants to bring back the TV that its customers enjoy, we’re available for talks at any time.”
The two companies have been involved in an ever more public battle (see Branson Vs Murdoch: Round Five) since BSkyB took an almost 18% in Britain’s biggest commercial broadcaster, ITV, effectively blocking the then named NTL’s plans for a merger (see Branson Bites Back At Sky’s Swoop On ITV).
Some reports indicate that the suggestion from agencies has been that multi-channel services including ITV2, Film4 and Five US will be the major beneficiaries now that BSkyB’s basic channels have been pulled from Virgin Media cable TV homes.
It will be these free-to-air, platform neutral, multi-channel services that stand to benefit the most from viewers seeking alternatives to BSkyB channels such as Sky One, say the reports.
BSkyB: www.sky.com Virgin Media: www.virginmedia.com