Sky vs VirginMedia/ntl/Telewest

[Rich]

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?