Virgin Media made a profit for the first time in 2011, ending decades of losses for the cable television sector in the United Kingdom, although the company still has £5.8 billion in long-term debt. Virgin Media is enjoying some success with its new TiVo product, now in 435,000 of its 3.8 million television homes. Over half of new TiVo subscribers are coming from Sky, but overall Virgin Media lost over 15,000 television subscribers over the year. The cable company delivered over a billion on demand views in 2011, working out at around 2.5 hours per home per week, which is more than the third most popular channel in the country.
Announcing annual results for 2011, Virgin Media reported a net profit of £76 million, on revenues of £4 billion. The company received £239 million by disposing of its half stake in UKTV.
The TiVo customer base more than doubled in the last quarter, with 273,000 net additions, reaching a total of 435,000 TiVo customers. That accounts for 12% of their 3.763 million television subscribers, down 15,000 on a year previously. In comparison, Sky added 157,000 television subscribers in the same period. There is still plenty of room for growth. Only around 30% of homes passed by the Virgin Media network take its television service.
“Our strategy of focusing on customers who want more from the digital world is paying off,” said Neil Berkett, the Chief Executive Officer of Virgin Media. “With the number of TiVo customers doubling in the final quarter of the year, our new TiVo service is attracting both new and existing customers.”
Virgin Media also shared some data of TiVo customer usage. The search function was used a million times in November 2011, which is just over twice a month per TiVo household. There were 2.4 million app sessions, which is about 5.5 sessions a month per household. There were 8 million thumbs up or down ratings given, around 18 a month per household. Although significant, this still hardly represents a substantial shift in viewing behaviour, given that each household will have watched an average of almost 120 hours of television in that period.
Among its entire customer base, the Virgin Media video on demand services averaged 90 million views a month, reaching over a billion video on demand views in the year to a total of 490 million hours, an increase of 14% on the previous year. Over 70% of television customers use the service regularly, a figure that has risen consistently in recent years, although it still leaves 30% who do not. It works out at around 2.5 hours a week per home, out of an average 28 hours per week of television watched by individuals across the country.
Virgin Media likes to point out that if its On Demand service were a channel it would be the third most popular channel in cable homes. That would put it after BBC1 and ITV1, and ahead of BBC2, which has around a 7% share of the audience.
While video on demand may be highly valued, it still represents a relatively small volume of overall viewing. While Virgin Media does not disclose figures for time-shifted viewing from its digital video recorders, it did reveal that within three months TiVo users are typically looking at recorded programmes more than they do the traditional television guide.
As far as superfast broadband is concerned, a small but growing proportion of customers is prepared to pay extra for higher speeds. 72% of Virgin Media broadband customers are on the entry-level 10Mbps tier, compared to 80% a year previously. The introduction of a 30Mbps tier now attracts 12% of customers, while just 5% have opted for 50 or 100Mbps. That seems to indicate that the fast headline speeds by which Virgin Media aims to differentiate its service are only important to a small proportion of its market.
Virgin Media expects broadband traffic on its network to almost double over the next two years. On average, its customers download 49 gigabytes of data per month, including video on demand services.
If anything, the turnaround of Virgin Media is as much about marketing as the fundamentals. It talks a lot about TiVo but only 12% of its television customers currently have it. It talks a lot about 100Mbps broadband but less than 3% of its customers have it. Nevertheless, Virgin Media has emerged as a credible competitor to Sky.