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Virgin Media in spotlight … again

by David Mercer | 7月 04, 2007

Back in March, Virgin Media subscribers lost access to Sky channels, and many observers predicted 10s if not 100s of thousands of Virgin customers would defect to Sky's dish service as a result; and, indeed, Virgin itself predicted some customer losses. But on June 8th the company issued a statement indicating that it was performing better than expected and was now forecasting "flat" TV subscriber numbers for Q2. Virgin attributed this improvement to "mitigating" actions. One of those actions seems to be that Virgin customers are being offered considerable discounts if they threaten to churn or express dissatisfaction. Friends of mine who were, until recently, one of Virgin's dwindling band of analogue TV subscribers, were upgraded to a smart new V+ box recently for no additional cost. This makes perfect sense for Virgin, as it owns the box, and they are doing a lot more good in customers' homes than in warehouses. The company really should mop up the remaining 300,000 or so analogue customers by giving them digital boxes, thus simplifying and freeing up its network to do more useful things than carry analogue television. The V+ box is an excellent product. Using Virgin's modern EPG, with Picture-in-Picture and fast menu selections, it emphasised once again how old the Sky EPG platform has become (10 years+ since development began). The Sky+ system typically takes 5-10 seconds to bring up a new EPG page, and blankets the TV screen instead of allowing uninterrupted viewing via a TV window. It may still be easy to use, but the Sky platform looks increasingly long in the tooth. And, critically for Virgin, the VOD function is really quite impressive. OK, so most viewers will only find some of the programming appealing, as is the nature of TV in general, but most will find something of interest. And it works extremely well, something that has not always been said of cable technology in the UK - an easily navigable menu and rapid programme start. Some programmes are pay-per-play, but many are free, including of course the BBC's selection. My friends (who had basic analogue TV until recently) tell me that VOD has become a regular part of their TV viewing (not least because their kids can get wall-to-wall Doctor Who series on demand - paradise!), and they will find, of course, if they ever consider satellite, that this type of service is not available with a dish. So, after so many years, perhaps digital cable's silver bullet is finally beginning to have an impact on customer demand. Of course VOD won't have any major short-term impact on the cable/satellite battle for customers, but with the technology rolled out and getting deployed, Virgin should be more aggressive in promoting the fact that it can offer something Sky cannot (Sky's push-VOD/DVR approach can only ever be limited in comparison to true VOD). It should also promote HD VOD more actively as well to support the rapid adoption of HD-ready TVs; again this is something Sky will struggle to match. While Virgin's customer numbers may be a pleasant surprise, we should watch their ARPUs closely, and whether increased customer retention costs are being offset by growing new service revenues, such as from VOD. Such is the market background to the renewed interest from private equity, with Goldman Sachs exploring potential investors, and Carlyle Group reported to have made a $10bn bid. Some observers suggest Branson may be ready to sell up, but this seems extremely unlikely. Having gone to all the trouble and expense of becoming a media mogul, he is clearly in this for the long haul; whoever ends up with the majority of Virgin's shares, we can look forward to many more exciting instalments in the Branson/Murdoch feud.
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