Sky’s New Tactics

First Sky announces on Virgin Media’s launch day that they’re pulling off Freeview and encrypting their channels with their own box to serve premium content.
Now we learn that Virgin Media cable customers were shown this advert over the weekend. It suggests that Virgin Media (or “ntl:Virgin” as the ad would have it) is “doubting” the value of several Sky channels including Sky One and Sky News. It then helpfully provides a phone number to allow viewers to phone up the Virgin call centre and complain.
Now this has to be a pretty low down and dirty tactic.
Every few years, the various channel owners and distributors have to sit down to hammer out how much revenue, if any, the channel owner should be paid by the distributor who collects subscriptions. For example, MTV might get 25p per customer per month for each Sky Digital subscriber who takes a package that includes that channel.
This is a game of hardball negotiation. Recently there have been stories that Flextech is likely to take a significant cut in the amount Sky pays it for its channel package that includes Bravo, Living, Trouble and Challenge. Flextech is, of course, now owned by Virgin Media. The amount payable is reported to be falling from 40p per subscriber per month to perhaps as little as 10p. That could have a serious impact on the channels’ profitability.
In the meantime, it now seems that Virgin Media is playing tough in negotiations in how much Sky gets for some of its channels – namely Sky One, Sky News, Sky Sports News and Sky Travel.
Sky’s taking public, what is really just another business negotiation, in the form of this ad.
I’m sure that the timing of these very public slanging matches is entirely coincidental. The question is now whether or not Ofcom moves in to calm things down and sort these issues out. Persoanlly, I don’t think Sky’s doing itself any favours.
[UPDATE] Ofcom’s now investigating following complaints.


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