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BskyB may lose if it does not strike deal with Virgin Media

March 1, 2007

BSkyB could lose up to 20 million pounds if it fails to strike a deal to show its basic TV channels on Virgin Media.

Negotiations to secure a deal between the two sides have turned into a public slanging match in the last week.

The increasingly bitter dispute is just the latest spat between the two sides which first clashed publicly in November 2006 when BSkyB effectively blocked the company, which was then called NTL, in its plan to buy or merge with Britain’s commercial broadcaster ITV.

At stake in the current row are BskyB’s basic channels which include Sky One, offering such popular programmes as Lost and 24, and Sky News and Sky Sports News. Its premium channels showing sports and movies would not be affected.

Virgin Media says its rival engineered the row by asking for more than double the existing arrangement in order to suppress competition. BSkyB says it has increased investment in its channels by over 68% over the last five years and wants a fair price.

But the row is also a wider reflection of the increasing competition in the United Kingdom’s television, broadband and telephone industry, where content is often a crucial factor in customer choice.

Analysts say that carriage disputes are regular occurrence in this industry and any breakdown could result in a “greater long-term detrimental impact for Virgin than BSkyB.”

“Indeed, if content is king, having channels exclusive to the Sky platform could well play to the long term benefit of BSkyB, which is surely not Virgin Media's goal,” an analyst said.

BSkyB said failure to secure a deal would result in a reduction of 15 to 20 million pounds of operating profit in relation to the remainder of the year to June 30, 2007.

Analysts say this would imply a full-year impact of 45 million to 60 million pounds. However, they note that Sky had recently made savings from an improved deal with Virgin over the cable operator’s channels.

Virgin, which launched in February 2007 from the merger of NTL, Telewest and Virgin’s mobile phone division, is investing in its on-demand service and has said that Sky’s channels were becoming less popular in Virgin Media homes.

The company, whose biggest shareholder is entrepreneur Richard Branson, recently signed the rights to Lost, but the series, currently on Sky, will not be available until later in 2007.






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BskyB may lose if it does not strike deal with Virgin Media



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