virgin media

Virgin Media and UKTV (And ITV) – Continuation

On my commute to work this morning, I saw a digital outdoor sign advertising a programme on Yesterday. I can’t recall the programme, but I can tell you that at the bottom, a large blue strap had added “Not available on Virgin Media.”

Things are ramping up in Virgin Media and UKTV’s dispute. The Guardian reports that Virgin Media is now sending out letters to interested other broadcasters to bid for UKTV’s slots on their EPG.

That feels like quite a hardball move from Virgin Media, since once those channel slots are gone, they’re unlikely to return. It’s obviously supposed to drive UKTV back to the negotiating table.

However in the meantime, The Guardian is also reporting that ITV and Virgin Media are also in dispute, with ITV reportedly suggesting it might pull all its channels from the platform by this weekend. Loss of ITV would be massive, with the channel responsible for lots of the biggest programmes on television. Even the loss of ITV2 on its own, at a time when Love Island continues to ride high in the ratings, is enough to make most platforms reconsider.

You suspect that ITV is pushing home a strategic advantage at a time when Virgin Media is already weakened from a consumer perspective with the loss of UKTV’s channels. If ITV’s channels were to drop off the platform, then there’d be a massive hole in what Virgin Media is offering viewers.

Certainly, most of those channels would remain available to viewers on Freeview, but the loss of on demand and recording functionality, along with the annoyance of having to flick around to jump between DTT and Virgin Media, is a disincentive.

This seems to be the result of an ongoing dispute between Virgin Media and ITV going back months. Last year, the Telegraph reported that ITV wanted between £45m and £80m in retransmission fees following a change in the law.

In April last year, the 2017 Digital Economy Act came into law, and it allowed for retransmission fees from cable operators – but notably, not satellite. Fees paid to broadcasters for otherwise free-to-air channels are the norm in the US, but hadn’t been the case in the UK. Indeed, broadcasters tended to have to pay platforms to ensure their services were covered.

This had become something of a bone of contention among commercial broadcasters, and ITV has been moving ahead most strongly.

As well as fees, prominence in the EPG and how catch-up offerings are presented are likely to form part of the negotiations. (As an aside, I note that Sky has recently been giving significant promotion to BBC programming, something it has not previously done on a regular basis).

The fees issue with UKTV and retransmission fees issue with ITV suggests that Virgin Media, under owners Liberty Global, is playing a really tough game at the moment, beating down channel suppliers as much as possible.

Losing ITV as well as UKTV could be a massive challenge for Virgin Media. I would imagine that groups like Sky and BT TV will be moving up their summer advertising campaigns (usually built around the upcoming football season) as a result.

[UPDATE] – It’s really worth listening to Virgin Media and UKTV slug it out on-air in this week’s episode of The Media Show. Both sides make their case, with Virgin Media very happy to carry the free-to-air channels for no money. UKTV want to sell them the entire package of channels – free and paid for. From their perspective, Virgin Media charges viewers to receive the channels, so they should get some subscriber money.

There was no mention of plans to sell off UKTV’s slot numbers. Nor was there any mention of ITV’s dispute, although that only really re-emerged following the programme’s recording.

Virgin Media and UKTV

We seem to be in the middle of a real old-school rights agreement brouhaha at the moment. Virgin Media has just removed all UKTV’s channels from its platform after what we must assume was a lengthy period where the two parties failed to meet terms.

UKTV is 50% owned by the BBC, and 50% owned by Discovery (following Discovery’s recent completion of its acquisition of Scripps). And UKTV is pretty successful. It has trodden the line of being both a pay-TV and free-to-air operator very carefully. It has a total of eight channels: W, Dave, Alibi, Gold, Eden, Drama, Really, Good Food, Yesterday and Home. Of those, five are also available on free-to-air platforms like Freeview and Freesat. The remaining channels, including Gold, Alibi and W are only available on pay platforms.

When the entity that would become UKTV was first set-up, it was heavily reliant on licencing repeats of notably BBC programming. But in recent years, it has made a lot of headway commissioning its own exclusive programming, and acquiring exclusive programming, or contributing to production budgets of international programming. That mix has seen it deliver strong ratings and revenues.

According to BARB, over the first few months of this year, it has average between 5.0% and 5.5% of viewing, placing it sixth behind the BBC, ITV, C4, Sky and 5 groups of channels. The biggest channels are Drama and Dave, which each get about 1% of viewing. To put that in perspective, it usually makes them bigger than any of Sky’s own channels including Sky 1 or Sky Living.

So why is there is a fight with Virgin Media? Well it’s cash. Who knows what Virgin Media pays for UKTV’s channel bundle, but it’ll be a handful of pounds a month per subscriber. From press reports, Virgin Media is seeking a steep discount on what it has been paying and UKTV isn’t happy.

Virgin Media’s key argument is that UKTV isn’t able to offer on demand rights to much of their programming.

This is true. The BBC does place limits on what programming can go onto the UKTV Play platform. That’s because the BBC is also selling those rights to streamers like Netflix and Amazon Prime Video. However, that doesn’t mean that UKTV play only carries their original programming or their acquisitions. You will find BBC programming on the platform. At time of writing, they have episodes of Sherlock, Silent Witness and Waking the Dead available to stream. However, there do seem to be limitations on what can appear in box sets. And obviously, UKTV’s own programming can stay available for much longer.

(Incidentally, this isn’t a situation unique to the UKTV/BBC agreement. Sky/Now TV sees HBO programming come and go in various windows. Game of Thrones will be there for a while; then it will drop off, perhaps coming back later in the year.)

However Virgin Media complaining is unlikely to change the BBC’s position. BBC Studios who maintains the stake in UKTV and also monetises programming on other platforms, is unlikely to budge just because Virgin Media would like it to.

In the short term, viewers lose out. Virgin Media is hoping that while it’ll lose some subscribers, they save money in the longer term. Their so-called replacements are, of course, nothing of the sort. And Sky will no doubt enjoy signing up a few new subscribers.

But this is a dangerous game. Channels like Dave and Drama are popular, and viewers will get upset. While those two are available on Freeview, others like Alibi and Gold aren’t. Some die-hard crime TV fans may indeed up and switch platforms. UKTV is an oddly powerful platform to have a falling out with. Perhaps they were pushing their luck with increased fees to support their continued investment in new programming. We may never know.

I suspect in due course, sense will prevail and a new agreement will be met. Recall that when Discovery and Sky had a big falling out about 18 months ago, it was resolved only at the 11th hour.