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Virgin customers wake up to no Sky channels
The week-long war of words between Virgin Media and bitter rival BSkyB last night culminated in the satellite broadcaster's channels, including Sky One, being pulled from 3.35 million households.
The failure of the two sides to reach a deal meant fans of shows such as Lost, 24 and Battlestar Galactica were cut off halfway through the current season.
Sky's contract to provide its basic channels - Sky One, Sky Two, Sky Sports News and Sky News - ran out at midnight without a deal in place after a dispute over price. Virgin Media plans to reshuffle its service so its new video-on-demand channel, Virgin Central, will appear on channel 120 where Sky One used to be. Cable customers will still be able to watch Sky's premium channels such as Sky Sports.
The dispute went public last week when the Virgin chief executive, Steve Burch, attacked Sky for its negotiating stance over how much Virgin pays Sky for its content. Yesterday the two companies even argued over who had orchestrated a last-minute lunchtime phone call between Sky's James Murdoch and Virgin executives Mr Burch and Jim Mooney aimed at resuscitating talks.
On the call Virgin suggested appointing an independent arbitrator to help thrash out a new deal, but demanded this process include a recent contract to supply Sky's satellite customers with channels from Virgin's content arm, Flextech.
Last month Sky secured a dramatic cut in what it pays for the channels - including Living TV - slicing Virgin's take from 40p a month per subscriber per channel to less than 10p. Sky says it is asking for just over 90p per month per subscriber for its channels. Virgin Media's chairman Mr Mooney said the company, which is £5.7bn in debt, had been "coerced" into signing the Flextech deal.
"The facts are their channels have declined in popularity, ours have increased in popularity. The facts are they are trying to double their charge to us and cut our fee," he said. "That's why they don't want to go to arbitration because the facts are so lopsided against them an arbitrator would see through that."
Sky hit back, saying: "Virgin Media has declined to re-enter talks and is now seeking to reopen existing agreements." The satellite broadcaster added that it wants to be able to sell its channels directly to cable households. Mr Burch, said that idea was "ludicrous".
Virgin Media, announcing results showing it lost 37,000 customers in the last three months of 2006, admitted the Sky switch-off could cost it more viewers.
Away from the fight over the Sky channels, Virgin yesterday announced slightly higher than expected fourth quarter revenue of £1.08bn, up from £916m in the previous year, and pledged to increase its £200m of free cashflow by at least 50% this year and again in 2008.
Virgin Mobile added a mere 11,100 customers in the last three months of 2006, traditionally one of the most buoyant periods in the industry, compared with 122,700 in the third quarter. While it gained 70,000 subscribers willing to pay monthly - up from 30,000 in the previous three months - it lost ground in the pre-pay market. Virgin used to dominate the pre-pay sector but is now concentrating on higher value contract customers.
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