First, to fill in the background: the two companies couldn’t agree on the price that Virgin pays Sky to show Sky’s “basic channels” (Sky One, Sky Three, Sky Sports News and Sky Travel). This resulted in the channels being withdrawn from Virgin’s cable TV service when the previous agreement expired at the end of February.
Now, Virgin Media customers who had signed up so that they could watch Sky One will understandably be angry. But to the outside observer, it’s surely Sky who are to blame for the situation. I know Virgin are not offering a reduction in price as a result, but they have said that customers wishing to leave won’t be held to any minimum contractual period, which seems fair enough.
It’s hard to know exactly what happened during the price negotiations. However, Virgin claim that Sky was asking for double the amount they had received previously. One other point that isn’t highlighted so much in reports is that, as part of the deal, Sky were insisting that customers on Virgin’s cheapest “Medium” TV package should no longer be able to receive their channels anyway. So any Virgin customers on that package would have lost out whether Virgin had agreed to the deal or not, simply because Sky didn’t want them to receive the channels.
Having forced Virgin to give up the Sky channels, BSkyB have launched a campaign of negative advertising and publicity. For example:
- Adverts on Classic FM telling Virgin Media customers they can no longer watch Sky One, and telling them that if they switch to Sky satellite TV, they will be able to catch up on Twenty Four, Lost and The Simpsons in a special “catch up” weekend.
- Newspaper adverts comparing TV, phone and internet prices from the two companies. While the price given for Sky is a special bundled package, they quote the total prices for individual services from Virgin, making it seem more expensive
This week, Virgin Media announced their new 20Mb/s broadband service, a product that has been in the pipeline for some time, and which had nothing to do with the Sky dispute. They described the new product in a press release. While they do say they their competitors can’t match the service, there is no mention of Sky (or any other competitor), and anyone who understands broadband will realise that Virgin’s technology is superior as they have a purpose-built fibre-optic network, rather than squeezing broadband down copper phonelines using ADSL. But Sky responded straight away, issuing a statement accusing Virgin of pushing up prices in the broadband market, and making dubious claims about their own service. Anyone who doubted which side is most “behaving like children” should take note that one company’s press release promoted its own product, while the other criticised the rival’s.
As if all that wasn’t bad enough, it seems Sky News even launched a subtle smear campaign against the Virgin name. I’ll add the caveat that I don’t see Sky News myself, but a poster on the BBC website claimed that in the aftermath of the Cumbria train crash, Sky’s report was heavily biased towards blaming Virgin Trains for the accident, at a time when the rest of the media were concentrating on a faulty track as the likely cause.
It was time someone stood up to Rupert Murdoch. He controls both one of the main broadcast platforms (satellite TV), the channels, and even many of the programs such as Twenty Four and The Simpsons (which are distributed by 20th Century Fox). His competitors are also his customers, and as has been seen, he can use his position to name his own price for his channels (which have the programs and movies people want to watch because he owns those too) safe in the knowledge that if they refuse to pay up, he can remove channels then poach the customers by urging them to switch to his platform. If Virgin hadn’t stood up to Sky, next time around, the price could double again. I’m not even going to touch on Murdoch’s control over other parts of the media such as the newspapers.
Fortunately, not everything is quite going Sky’s way. As a result of pulling channels from Virgin, they have lost 10% of the audience for their basic channels, so advertisers have indicated they will ask for refunds. In a separate development, Sky had announced it plans to withdraw its channels from Freeview, the UK’s free-to-air digital terrestrial platform, and to broadcast pay-TV channels instead. This has angered the other Freeview shareholders such as the BBC and ITV, who have asked the regulator Ofcom to strip Sky of its share in Freeview. Sky is also under investigation by the Office of Fair Trading after it bought a 17.9% stake in ITV, in a move widely seen as intended to block Virgin from buying ITV. Let’s hope the tide will start to turn against Sky, but it’s going take a long time and many more battles before healthier competition can be introduced into the British TV market.