The Browser Den

Not browser related, but both companies provide broadband Internet access in the UK so I’ll use that as my excuse for writing about this.

Today Virgin Meda’s contract to show the Sky basic channels package (Sky One, Sky Sports News and Sky News are the main ones in this pack, ex-NTL customers had a few extra ones as well), the two companies failed to reach an agreement of what they were willing to pay to continue to show the channels.

At midnight the channels went off the air, initially the picture froze and this was followed by a message that the service was temporarily unavailable. Now on each channel is a notice informing the customers that big nasty Sky have ‘picked up their ball and gone home‘ as well as some creative renaming of some channels in their programme guide - channel 602 is now labelled ‘Sky Snooze’.

So who can win out of this? In the short term I’d say no one, but in the long term this could result in a lot more interesting services produced by both Virgin Media and Sky. Without the basic Sky package Virgin have to strike deals to get more Video on Demand content to attract new customers and retain their existing ones.

Despite having the advantage of a high speed two way network it took Telewest and NTL a long time before they came up with a an offering that could compete with Sky+, Telewest then launched some services that finally moved them ahead in this area (Teleport - a video on demand service and TV Drive - a three tuner PVR) these services developed by Telewest are the basis of Virgin’s video on demand and interactive services.
Although Sky had the technical advantage for a long time there were two areas that they couldn’t compete with cable and that was as an ISP and telecoms company. To resolve this issue they purchased Easynet and started to offer free broadband to Sky customers as well as Sky talk package offering unlimited calling plans. The disadvantage is that these services still required a BT line, although Sky are rolling out an LLU network (this means that they house their own equipment in the telephone exchanges) they still rely on BT’s network to connect them to the exchange.

However, once Sky has finished expanding Easynet’s network they are likely to use it as the basis for offering a decent Video on Demand offering, competition between these two companies will see hopefully a lot of innovation in this area.

So why are cable customers losing the Simpsons channel and Sky News? Basically they couldn’t agree on a price. Sky wanted to increase the price they charged Virgin for the basic package and Virgin considered it not good value considering that Sky One’s ratings were slipping. However, some people believe this was either a tactic of Sky to force Virgin to drop the channel in the hope to get annoyed customers to switch to Sky TV, others believe Virgin had no intention to accept the deal so that Sky would lose the ad revenue (Virgin are not happy when Sky had taken a minority shareholding in ITV, it meant they could not make a takeover bid for the channel). Of course, perhaps neither side didn’t want to lose the channels, but Sky may have overvalued the importance that Virgin would view these channels (Sky One used to feature in most of NTL and Telewest’s marketing materials and even featured on Virgin Media’s website right up until the moment it was pulled).
Personally, I’m a Sky subscriber and pleased with the service they provide. Prior to moving to my current address I was a Telewest customer and would have probably still gone the cable route if it had been available at my address. The main reason for this was Telewest offered a great deal on a combined phone, TV and Internet deal, back then Telewest offered no on demand or PVR services so was less advanced than Sky.

If I still happened to be a cable customer I don’t think I’d switch because of removing these channels. Sky One was the only channel worth having and usually I only watch the Simpsons on there. Sky Sports News usually has so little content that the news items are repeated every 20 minutes and Sky News I can’t take seriously as they often get the facts wrong in an attempt to be first with the breaking news (their coverage of the 7/7 bombings was appalling). As for the Simpsons, there’s so many episodes floating around that it’s hard to find the ones that you’ve missed in the schedule, we really need TV on demand for shows that have been running this long rather than endless repeats.

Virgin’s main difficulty with negotiating rights to on-demand content that is currently shown on Sky One is that a lot of the content is owned by Fox and it’s almost certain than one Murdoch owned company would favour giving the rights to another.

So as long as Virgin Media don’t bankrupt themselves in the process (and I’m sure if they do make big losses on this decision Richard Branson will keep them afloat) I can imagine this competition being a good thing in the long run, however in the short term it’ll make a lot of people who enjoyed Sky One’s programming very unhappy.

In the future I’d like to see all programmes that are aired on satellite or cable TV to be available on an on demand basis, this would save all the hassle of remembering to record shows (although Sky are making this really easy, you can programme your Sky+ box by text message if you’re out of the house and forgot to set it), however, for the lazy among us I’d hate to see channels disappear altogether, it’s good sometimes to just sit down and let someone else decide what you’re going to watch (in music terms it’s a bit like the difference between the iPod playing music on demand and the radio where someone else picks your playlist).

Virgin Media’s own forums have a lot of people both for and against the decision. NTL and Telewest rebranded as Virgin Media on the 8th February 2007 and so some people have put the blame for this firmly on Virgin as less than a month after the rebranding they start losing channels, perhaps they should have waited until the deal with Sky was decided upon before rebranding. Sky v Virgin just looks like a battle of the billionaires to many outsiders, although Richard Branson is seen by most in a much more positive light than Rupert or James Murdoch a lot of people just consider it a bunch of rich guys fighting, if they were still trading as NTL and Telewest more people would probably see it as Sky crushing the little guys.

Not all of Virgin is against Sky. Virgin Radio (which was sold off by Richard Branson many years ago) has Sky as the sponsor of their popular breakfast show. This sponsorship deal predates the formation of Virgin Media.
One thing I don’t understand is why do Virgin Media have to pay for channels that are currently free to air? At the moment Sky News, Sky Sports News and Sky Three are available unencrypted on freeview, you can pick these transmissions up on any digital TV or set top box just like all other free to air channels like BBC and ITV. Does Virgin Media have to pay BBC, ITV, C4, etc for the rights to broadcast their free to air channels too? For those thinking of using freeview for these free Sky channels please be aware that they’re planning to scrap these in the future in favour of paid channels which will require a different set top box to freeview. However, in the meantime, while they remain free to air it seems crazy that Virgin can’t transmit them free of charge.

Throughout the day I’ll see what the blogging community thinks about this. Dave Cross (if you’re a Perl coder you’ll probably recognise the name) says the loss of the channels is no big dealand is happy that Virgin has stood up to BSkyB. The BBC forums are showing a balanced set of views but the majority seem to be on the side of Virgin so far.
Final word, for those that are worried that Sky Sports and Sky Movies will have the same fate fortunately these channels are protected by law and there’s a set rate card that Sky have to use when charging for these channels.

This entry was posted on Thursday, March 1st, 2007 at 12:12 am and is filed under Misc. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.