virgin-mediaLast November I looked in depth at the challenges facing Virgin Media in growing its TV customer base but figures published this week make it worth revisiting the issue.

According to the firm’s own published results it had 3,727,000 TV subscribers as of December 31 2015.

That number may not look too shoddy at first glance given it’s more than twice as many as either BT or TalkTalk can boast, but if we scrollback to 2010 when the firm had 3,729,600 TV users we see that its TV business is now, at best, stagnant.

Not only do the latest numbers show an absolute numerical decline but expansion of the Virgin Media network, which is now available to more homes than in 2010, means the TV base as a percentage of the overall potential market is also smaller.

Growth in the most recent quarter was a paltry 900 customers – about the same number as might visit a central London branch of Starbucks in a single day.

That figure would appear to be linked to Virgin’s decision to hike up prices for its XL channel pack to pay for the BT Sport Europe channel it foisted on all customers regardless of their interest in football.

The resulting £3 a month increase, the firm’s trading update tells us, was greeted by “elevated TV churn” – industry-speak for a customer walkout.

Virgin Media hoped to stop customer defections by adding BT’s new sports channel to its channel bundle rather than sell it as an add-on as it does with Sky Sports. But instead of swallowing the cost, it passed it on to every single XL customer and in the process scared a large number of them away.

Clearly many customers will be delighted that they’re paying so little for BT Sport Europe thanks to the subsidy paid by non-football fans and Virgin Media may believe that the number of lost customers would have been higher had it not been so generous with other people’s cash.

But it also now knows that its customer base isn’t willing to passively swallow price rises and that many will walk if the hike is connected to content they have no interest in.

This is a real problem because the firm has previously spoken of its desire to get more money from existing customers, but with a rebelling customer base its options to do so are limited.

BT and Sky, the two biggest providers of Virgin Media’s premium content, can see from these figures just how easy it is to undermine their rival’s business by squeezing more money from it in return for their channels.

With both paying ever higher amounts for sports rights it’s inevitable that they’ll look to pass some of that on to a firm which uses their content investment to lure in and retain customers who’d otherwise buy direct from them.

What if BT, presuming its contract with the rights holders allows, decided to be a bit naughty and put its Australian cricket coverage on a new channel?

We know from the fact that Virgin had to negotiate a separate deal for BT Sport Europe that any new channels probably aren’t covered by its carriage deal with BT.

Could Virgin Media afford not to offer BT Sport Cricket? Probably not. But the latest results show it probably couldn’t risk further customer loses by arbitrarily adding it to channel packs and expecting customers to just go along with a mandatory price rise.

And away from content, how does Virgin hope to continuing charging premium prices for a channel line-up which misses a number of top shows and channels and is based on ageing technology which struggles to hold its own against BT and TalkTalk’s YouView, let alone the new Sky Q?

Unless Virgin Media starts buying up its own content and improves its TV platform’s hardware it’s impossible to see how the currently stagnating platform could return to growth.

Absent this investment, the firm is likely to find itself managing decline as customers are increasingly lured away by cheaper operators such as BT, TalkTalk or NOW TV, or moving to a truly premium platform in the shape of Sky Q.

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Comments

  1. Passingbat says

    “and is based on ageing technology which struggles to hold its own against BT and TalkTalk’s YouView”

    You Keep your Youview box and I’ll keep my current Tivo any time over a Youview box. Functionality wise, Tivo is the best PVR out there at the moment.

    Sky Q isn’t out there yet. When it does appear, yes, it will be the best box. But why are people not prepared to wait and see if VM come up with an answer to Sky Q? Tivo in the US already have technology to rival Sky Q. And VM’s Tivo is based on Tivo US software. Therefore VM have the wherewithal to challenge Sky Q if they decide to.

    “That figure would appear to be linked to Virgin’s decision to hike up prices for its XL channel pack to pay for the BT Sport Europe channel it foisted on all customers regardless of their interest in football.”

    That bit I agree with. VM initially adding BT sport to the XL pack the was one of the reasons for me to go onto the free M TV pack (effectively Freeview with a few non essential channels missing) but keep Tivo.