Bad day for Virgin

Dafydd Vaughan on 24 February 2007

Yesterday seemed to be an extremely bad day for Virgin.

Virgin Media

Virgin MediaVirgin’s new company – Virgin Media has been involved in a major disagreement with rival supplier Sky over the amount Virgin pays to be able to provide channels such as SkyOne, SkyTwo, SkyThree and SkyNews to its customers.  Essentially Sky has insisted that Virgin Media pay more than double the amount it currently pays for the channels.  Virgin, unsurprisingly is refusing to pay this, meaning that from this Thursday, these channels will be disappearing from their network.

So, why is Virgin refusing to pay for these channels?  Well, this dispute is the latest in a series of events that have culminated in this decision.  Several months ago, Virgin Media (formerly ntl:Telewest) made an attempt to buy the broadcaster ITV.  Before this could happen, Sky purchased more than £1bn in ITV shares, making it impossible for the deal to be completed.  Sky has since been referred to the industry regulators for doing this.

Earlier this month, Sky and Virgin Media negotiated a reduction in the price Sky pays for channels like Bravo and LivingTV.  This deal saw Virgin getting approximately 10p per Sky subscriber per month per channel, whereas previously it was 40p (a three-quarter reduction in the cost).

Since then, Sky and Virgin have begun negotiating the price they pay for Sky’s channels.  Sky has demanded that Virgin pay more than double the cost they were paying previously.  During these negotiations, Sky ran a series of adverts aimed at Virgin subscribers urging them to contact Virgin Media’s customer service and demand they keep SkyOne.  Virgin believed that Sky was using bullying tactics to get the money they want.

On Thursday night, Virgin made its final offer to Sky.  Sky rejected it.  Virgin Media’s chief executive Steve Burch said “They not only rejected it but indicated they were not going to go further with negotiations even though the contract didn’t expire until next week. And they indicated to us that they had planned a PR campaign for this weekend to show we wouldn’t be carrying Sky Basics any more.”

All this brings us to where we are now.  Sky is expected to loose about £45m in advertising revenue from not being on the Virgin Media network, and Virgin Media customers are set to loose shows such as 24, Lost and The Simpsons as SkyOne disappears.

My opinion?  Personally, I think Sky is being anticompetitive, and hopefully this will be referred to the industry regulator.

Virgin Trains

Virgin TrainsThis wasn’t the only problem faced by the Virgin Group yesterday.  Last night, around 20:10, a Virgin West Coast Pendolino express service from London Euston to Glasgow crashed in Cumbria killing 1 and injuring several others.

Virgin Trains Pendolino crashDespite the train derailing at 95mph and falling down an embankment, there were not a lot of injuries, and the train seems remarkably intact.  Virgin even believes that the train may be able to be used in service again after repair work.

The investigation into the exact causes has now begun.  Virgin Group boss Sir Richard Branson has praised the driver of the train who is thought to have stayed in his cab attempting to slow it down before it rolled down the embankment.

Hopefully all those injured will be ok and the driver recovers soon.

Any views stated here are my own and not those of my employer unless otherwise stated.