BSkyB - Competition - Virgin Media

Virgin Media

Virgin Media (Re-branded in 2007 from NTL:Telewest) is a major competitor to Sky in the satellite broadcasting market. Virgin Media's cable network was also formed by numerous mergers and acquisitions over the last decade, with different cable companies having used different types of network and technology in their areas.

Virgin Media previously owned a 50% stake in the UKTV network and owned Sit-up Ltd and Virgin Media Television, the former content arm of Telewest, then known as Flextech Television.

Like Sky, Virgin Media offers a high-definition television (HDTV) capable set top box, although from 30 November 2006 until 30 July 2009 it only carried one linear HD channel, BBC HD, after the conclusion of the ITV HD trial. Virgin has claimed that other HD channels were "locked up" or otherwise withheld from their platform, although Virgin did in fact have an option to carry Channel 4 HD in the future. Nonetheless, the linear channels were not offered, Virgin instead concentrating on its Video On Demand service to carry a modest selection of HD content. Virgin has nevertheless made a number of statements over the years, suggesting that more linear HD channels are on the way.

In Q3 2009 Virgin announced that it was making more linear HD channels available on its platform, including FX HD, MTVN HD, Channel 4 HD, and National Geographic HD. As expected, Living HD followed shortly.

In 2007, BSkyB and Virgin Media became involved in a dispute over the carriage of Sky channels on cable TV. The failure to renew the existing carriage agreements negotiated with NTL and Telewest resulted in Virgin removing the basic channels from the network on 1 March 2007. Virgin claimed that Sky had substantially increased the asking price for the channels, a claim which Sky denied, on the basis that their new deal offered "substantially more value" by including HD channels and Video On Demand content which was not previously carried by cable.

In response, Sky ran a number of TV, radio and print advertisements claiming that Virgin media 'doubted the value' of the channels concerned, at first urging Virgin customers to call their cable operator to show their support for Sky, but later urging Virgin customers to migrate to Sky to continue receiving the channels. The broadcasting regulator Ofcom subsequently found these commercials in breach of their code.

The availability (at an extra charge) of Sky's premium sport and movie services was not affected by the dispute. This impasse continued for twenty-one months, with both companies initiating High Court proceedings. Amongst Virgin's claims to the court (denied by Sky) were that Sky had unfairly reduced the amount which it paid to VMTV for the carriage of Virgin's own channels on satellite.

Eventually, on 4 November 2008 it was announced that an agreement had been struck for Sky's Basic channels – including Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts 1, Sky Arts 2, Sky Real Lives and Sky Real Lives 2 to return to Virgin Media from 13 November 2008 until 12 June 2011. In exchange will be provided continued carriage of Virgin Media Television's channels – Living, Livingit, Bravo, Bravo +1, Trouble, Challenge and Virgin1 for the same period.

The agreements include fixed annual carriage fees of £30m for the channels with both channel suppliers able to secure additional capped payments if their channels meet certain performance-related targets. Currently there is no indication as to whether the new deal includes the additional Video On Demand and High Definition content which had previously been offered by Sky. As part of the agreements, both Sky and Virgin Media agreed to terminate all High Court proceedings against each other relating to the carriage of their respective basic channels.

On 4 June 2010, British Sky Broadcasting and Virgin Media announced that they have reached agreement for the acquisition by Sky of Virgin Media Television. The companies have, in parallel, agreed to enter into a number of agreements providing for the carriage of certain Sky standard and high-definition (HD) channels. Sky acquired VMtv for a total consideration of up to £160 million in cash, with £105 million paid on completion and the remainder paid following the regulatory process. The acquisition expanded Sky's portfolio of basic pay TV channels and eliminated the carriage fees it previously paid for distributing VMtv channels on its TV services. New carriage agreements will secure wholesale distribution of Sky's basic channel line-up, including Sky1 and Sky Arts, and the newly acquired VMtv channels, on Virgin Media's cable TV service. For an incremental wholesale fee, Virgin Media will, for the first time, have the option of carrying any of Sky's basic HD channels, Sky Sports HD 1 and Sky Sports HD 2, and all Sky Movies HD channels. Virgin Media will make available through its on-demand TV service a range of content from Sky's basic and premium channels, including the newly acquired VMtv channels. Virgin Media will also have access to red button interactive sports coverage and the opportunity to deliver selected standard definition programming over the internet. Sky will assume responsibility for selling advertising for the newly acquired VMtv channels from January 2011. Completion of the agreements was conditional on obtaining merger control clearance in the Republic of Ireland.

Virgin1 was also a part of the deal but was rebranded as Channel One on 3 September 2010, as the Virgin name was not licensed to Sky. The new carriage deals are understood to be for up to nine years. Previously the carriage deals tended to be struck every three years.

On 29 June 2010, The Competition Authority in Ireland cleared the proposed transaction. The parties proceeded after the Minister for Enterprise, Trade and Innovation did not direct the Authority to carry out a full investigation within 10 days of the date of the Authority’s decision.

On 13 July 2010, British Sky Broadcasting and Virgin Media announced that Sky has completed the acquisition of Virgin Media Television (VMtv) following regulatory approval in the Republic of Ireland. VMtv was then renamed the Living TV Group. In completing the acquisition, Sky has paid Virgin Media an initial £105 million. Up to an additional £55 million will be paid on UK regulatory clearance.

On 20 July 2010, The Office of Fair Trading announced that they would review BSkyB's acquisition of the Virgin Media Television business to judge whether it posed any competition concerns in the UK. The OFT planned to investigate the deal to see whether it could constitute a qualifying merger under the Enterprise Act 2002. The watchdog invited interested parties from the industry to comment on the sale, including its potential impact on the pay-TV market. On 14 September 2010, The OFT decided not to refer BSkyB's takeover of Virgin Media's TV channels to the Competition Commission.