Despite an extensive and expensive advertising campaign, Virgin Media added only 2,200 cable television customers in the last quarter following its dispute with British satellite broadcaster BSkyB over the cost of carrying some Sky channels. Less than six months since a major media re-launch, the loss-making cable company is apparently still looking for a buyer.
The cable company lost 70,000 television customers in the last three months. It attributed 40,000 of these to the loss of the Sky One, Sky News and Sky Sports News channels following a dispute over carriage costs. Adding 72,000 new customers resulted in a modest net addition, rather than the more significant losses forecast by some analysts, notably investment bank UBS.
Virgin Media chief operating officer Neil Berkett managed to remain positive. “In the last quarter we expected to have negative subs in this period because of the whole Sky row — in fact we were looking at being tens of thousands down. But to come out with 2,200 additions is very positive, especially when some, like UBS, were predicting 400,000 losses.”
While the losses may not have been as great as some had feared, it still seems extraordinary that the result of a re-launch under the Virgin Media brand and a massive multi-million pound marketing campaign should have left the cable company with only a few hundred thousand more viewers that it had under the unloved NTL:Telewest brand.
The number of households with a V+ digital video recorder rose by 53,000 to just 167,000. At 5% of digital cable customers this remains very modest, compared to the more established Sky+ box from BSkyB with which it competes. Virgin argues that its recorder is superior, having three tuners, but while Sky+ has entered the language — rather like TiVo in the States — nobody yet seems to be talking about V+, or for that matter the V Box from BT Vision.
On the broadband front, the number of Virgin Media customers rose by 50,500 to 3.5 million — almost half the number added in the previous quarter — maintaining the position as the leading residential broadband provider in Britain. This follows an aggressive comparative campaign of print and poster advertising, including a number of claims that have been reported to the Advertising Standards Authority for inaccuracy. Notably, Virgin Media claimed that unlike other operators its broadband service was delivered by fibre, when in fact it is carried to the home on a co-axial cable rather like a television aerial. The ASA has already asked Virgin Media to withdraw one advert and review its copy more carefully in the future.
Financially, on a turnover approaching a billion pounds over the quarter, Virgin Media made a net loss of £119 million, around the same as its net loss in the previous quarter.
Virgin Media is currently courting suitors in suits, having decided that its best option may be acquisition. Ironically this has coincided with the worst financial market conditions for many years, raising doubts whether some prospective purchases will have access to the credit for such a deal.
With Virgin in the red corner and Sky in the blue, both companies have come out fighting, but after the second round Sky certainly seems to be ahead on points.