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28th February 2007, 18:57 | #1 |
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Sky vs VirginMedia/ntl/Telewest
Well, some of you will have seen the full page colour advert Branson took out in the national papers at the weekend.
For those that didn't: Anyway, a long story cut short, Sky have hiked their price for Sky One, Two, Three, News and Sports News. Branon said on your bike Murdoch, we're not paying that. Murdoch said oh yes you are, Branson said oh no we're not. So after much banter, Branson has told Murdoch what he can do with his channels and all VirginMedia customers are now going to lose the channels I listed above. To put this into monetary terms, ntl:telewest used to pay Sky 90p per customer, which worked out in real money terms to be £32 million quid a year. Now, Sky can probably afford to take a £32m cut in turnover, but what the shareholders might not be aware of is the affect this will have on their investment. For arguements sake, lets say Sky One is the most watched non-terrestrial channel in the UK, what with Lost, 24, Prison Break (which fyi was made by Fox, one of Murdochs own firms), etc. So lets also say (the following figures are example only) that Sky have 10 million customers, including cable customers via Virgin. Now then, lets say Sky will sell advertising space to people at £10,000 per 30 second slot. Sky will sell this space based on the fact that 10 million people will be watching Lost or whatever and they will tell advertisers this is their potential audience. Sky now will of course have to say, actually, we don't have 10m viewers any more, we've only now got 6.5m because VirginMedia have gone away with their 3.5 million so we can't charge you £10k per 30secs we can only charge you £6.5k (example figures here don't forget) Now, take this £3.5k drop in advertising revenues, times it by the 12 adverts shown every hour, on every channel and it works out to a lot. An awful lot... Anyway, it's crucnch time tonight, VirginMedia have until midnight to renew the deal with Sky or that's it, game over. Will Branson budge? Hell no. Will Murdoch budge? Who knows. If they don't reach an agreement, Sky will have to increase their prices (again) to take up the loss in revenue and VirginMedia will cease to air said channels. If they do reach an agreement, Sky will earn more money and VirginMedia customers will see the price hike. Who's the winner in all this? |
28th February 2007, 19:02 | #2 |
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Official Press Release
Sky tries to double price of under–performing basic channels
As Virgin Media builds market leading portfolio of programming, Sky tries to stifle competition by engineering withdrawal of basic channels from competitor's service Since its launch on February 8th, Virgin Media (NASDAQ: VMED) has announced plans to enhance dramatically its digital TV service with a combination of new programming and cutting edge, on demand technology. As a result, in addition to over 100 traditional broadcast channels, its digital TV customers now have access to over 2,700 hours of on demand programming, including a huge range of hit TV shows and highlights from the previous week's broadcast schedules. Recent content deals with the leading studios for major hit shows such as West Wing, CSI, The OC, Nip/Tuck, together with our competitively priced packages incorporating Sky Sports and Movies and the launch of Virgin Central, means that Virgin Media more than matches any content available to customers in the pay–TV market. Our aim is to build on our leading position and double our offering to 6000 hours of on demand content over the coming months. This expansion has coincided with negotiations to renew the contract for carriage of Sky's basic channels – including Sky One, Sky Two, Sky Three, Sky News and Sky Sports News – across Virgin Media's network. However, following an intensive series of meetings over the last week, we now anticipate a withdrawal of these channels by Sky at the end of February. The nature of these negotiations leads us to believe that this outcome has been deliberately engineered by Sky in order to suppress competition and coerce Virgin Media's customers into switching to its service by denying them access to the basic channels. (These negotiations do not impact Sky's premium sports and movies channels which will continue to be available to Virgin Media customers.) This view is reinforced by Sky's decision to broadcast, at the height of negotiations on 12th February, a series of promotions claiming that the channels were about to disappear from Virgin Media's network. This was nothing more than a heavy–handed attempt to exert undue influence on the negotiating process. Despite a dramatic and sustained decline in the basic channels' popularity in Virgin Media households (they have lost an average of 7 per cent of their cable viewing every year over the past four years) and the disappointing performance of some recent programming, Sky has consistently demanded a carriage fee more than double the existing arrangement. Virgin Media recognizes that the basic channels have been part of its TV line up for many years and has responded with a series of offers designed to ensure they remain so. Sky, however, continues to demand a price that bears no relation to the channels' popularity and is radically out of line with the way it values competitors' channels on its own network. It remains Virgin Media's position that negotiations are ongoing and we continue to seek an agreement on terms that make commercial sense for both parties. However, as things stand, Sky's demands offer no prospect of us being able to reach a commercially viable agreement to continue carriage of these channels on Virgin Media's platform. If Sky withdraws its channels, Virgin Media will divert any money saved into continuing the transformation of our TV service with an extensive range of new channels and programming. This will include further additions to our existing on demand library and ensure our TV service more than matches anything on offer from Sky. For Sky meanwhile withdrawal will mean an estimated £45 million a year reduction in advertising revenues, over and above the subscription fees they will forego. Their willingness to do so speaks volumes about their desire to suppress meaningful competition. This follows a largely–overlooked press statement by Sky on February 8th announcing plans to remove a number of free channels from the Freeview platform, depriving over 7 million Freeview viewers access to those channels. Sky indicated that it intends to use these Freeview slots to offer four subscription channels on terms that have not yet been announced. Commenting on the anticipated withdrawal of Sky's basic channels, Steve Burch, President and CEO of Virgin Media said: "Throughout its history, Virgin has challenged the attempts of dominant corporations to manipulate markets, stifle competition and dictate consumer choice. It has done so simply by giving consumers a better deal and Virgin Media is going to do the same. "Sky's behaviour is a heavy handed and anti–competitive response to that challenge and consumer choice has been reduced as a result. I'm pleased, however, that at a time when they're taking content away, Virgin Media is giving people more." Last edited by Rich; 28th February 2007 at 19:16.. |
28th February 2007, 19:08 | #3 |
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Thanks for the explanation Rich. It's always about money. To be honest the only show i watch on Sky is the Simpsons, and not as much as I used to.
I have been with NTL for maybe 4 yrs now. Blooming good service if you ask me. I hope it can only get better with Branson in charge
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28th February 2007, 19:10 | #4 | |
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Back to Sky.....all they ever seem to do is rise their prices or just want more and more money. Sorry rant over now Regards Tom |
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28th February 2007, 19:20 | #5 |
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Well, this is where it could get interesting for the VirginMedia customers. If the deal does not go ahead, Sky could lose some of their exclusive "air" rights. Other television production companies will soon hear of a 3.5million un-tapped audience and could well go to VirginMedia direct. Wouldn't you if you had a chance of a £32m price?
Tom, this was the single biggest factor in me cancelling my 5yrs+ contract with them which included Sky World, Sky+, Multiroom, etc. I'm sure others will follow suit. |
28th February 2007, 19:23 | #6 | ||
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Quote:
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28th February 2007, 19:28 | #7 | |
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And this is on the PR Newswire:
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28th February 2007, 19:40 | #8 |
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I'm with Telewest/Blueyonder AKA Telewest/Blueyonder/NTL AKATelewest/Blueyonder/NTL/Virgin Media... Phew!
Anyway.. I'm glad Sir R Branson has stood by his guns over this. If Sky could get away with it, they would do to the cable company what they did to BSB (remember the 'squariels?). Losing a few channels not too many people watch, with the exception of maybe Sky 1 is no great loss, and maybe us cable users will end up with a better deal in the long run - here's hoping anyway. My favorite channel is intact (Hallmark), and there are 'other' ways of watching a lot of the shows we'll lose when the plug is pulled on Sky 1.. |
28th February 2007, 19:35 | #9 |
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NTL here and have been for years. Never had an issue with them and I commend Banson for not allowing to spanked by Sky
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28th February 2007, 19:37 | #10 |
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Yeah likewise, not many people would have the stones to take such a stand against such a large corporation!
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