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