VM_TiVo_Box_Remote_900Figures published last week showed that Virgin Media’s TV customer base is starting to dwindle in the face of strong, low cost competition from BT, TalkTalk, Netflix and Sky’s Now TV.

The cable firm lost 10,700 customers in the quarter ending September, a 15,000 fall on the previous quarter. By comparison Sky added 43,000 new TV customers across its two UK brands and BT gained 106,000 subscribers to its TV platform in the same period.

TalkTalk today announced 25,000 for the same quarter, lower than in previous periods but the firm has been rowing back from the high pressure sales tactics which have, anecdotally, left some customers unable to get off the phone until they agree to take a box.

So why is Virgin Media falling behind when everyone else growing?

Theoretically the firm has space for growth – of the 12.7m homes able to receive Virgin Media’s services only 3.7m take a TV package. That’s almost a million fewer homes than buy broadband from it.

The firm is very proud of its ultra-fast broadband network which offers speeds of up to 200Mbps – more than twice that achievable by ISPs using BT’s network – and in order to help achieve a high spend per customer it’s made that top speed the default on TV packages which offer the most popular entertainment channels including Sky 1 and Sky Living.

Browse the firm’s sales pages and you’ll find yourself being asked to pay £68.99 per month including line rental to watch The Flash and The Blacklist.

By comparison TalkTalk offers unlimited non-fibre broadband, a mobile SIM with 100 minutes per month, unlimited anytime landline calls and a TV channel pack which includes six Sky entertainment channels for £37.70 per month.

Even you add a ‘channel boost’ which includes GOLD, Fox and Universal your monthly subscription will still be just £47.70 – almost a third less than Virgin Media’s.

If you care about HD channels and very fast broadband speeds then TalkTalk’s packages probably aren’t for you – if you add a fibre broadband to the above package the difference between TalkTalk’s offer and Virgin’s drops to just £16, although you do get the free SIM for which Virgin would charge you another £5 per month.


But the problem for Virgin Media is that lots of people don’t care enough about broadband speeds and picture quality to pay a premium for them.

Not all of TalkTalk’s 1.4m customers will be in areas where Virgin Media’s services are available but many will and they opted for a lower monthly spend over bells and whistles.

BT doesn’t have access to Sky’s entertainment channels but unlike both TalkTalk and Virgin Media has invested billions in original content, most notably sports but also entertainment with its AMC deal, in order to attract customers.

That strategy is paying off – last quarter’s 106,000 additions was driven by the ISP’s £900m investment in European football and with 1.3m TV subscribers BT is within touching distance of overtaking TalkTalk (1.4m) as the UK’s third biggest pay TV provider.

Again, some of BT’s customers will be people who could get Virgin Media but opted for a cheaper deal (BT’s lowest package with pay-TV channels will cost you £37.99 including BT Sports) or have been won over by the appeal of its HD red button streams or Ultra High Definition channel which are exclusive to BT TV.

Sky also holds back some of its best content from Virgin Media and TalkTalk, most importantly Sky Atlantic which is of course home to Game of Thrones. Unlike TalkTalk, Virgin Media is priced as a premium product but the absence of genuinely ‘must see’ shows undermines its positioning in the market.

And Sky has also managed to dent the appeal of rivals by launching the NOW TV service which offers low-cost, contract-free access to its entertainment, sports and movie channels, each of which are available through separate monthly ‘passes’ which users can dip in and out of at will.

Sky realised that once you’ve signed up everyone who is willing to pay for your core service you need something to offer everyone else and having pretty much exhausted the premium end of the market it moved to the other end of the spectrum where it’s doing well in converting Freeview homes into pay-lite.

Virgin Media’s status as a mere content reseller rather than an originator and channel owner means it doesn’t have the rights deals in place to ape Sky’s NOW TV strategy even if it wanted.

It could of course try buying the rights to stream channels but the key content is owned by Sky and BT who have no reason to help Virgin Media grow and would likely seek a healthy premium in any deal.

The company already bitches about the price it pays rivals for their channels and even pushing up the price of its XL channel pack when BT Sport Europe was added is only expected to “offset a substantial portion of the higher BT Sport costs” it’s paying to BT.

Launching a NOW TV-like service at a competitive price would be a challenge and most of the revenue would likely walk straight out of Virgin Media’s door and into the pockets of its biggest competitors.

Even TiVo, the much-heralded ‘next generation’ box on which Virgin Media pinned the hopes of its TV growth has turned into a damp squib.

When it launched in 2010 Virgin heralded TiVo as the best way to watch TV but many customers now complain about a slow, laggy user interface and early promises of “hundreds of apps” have failed to be delivered on.

Today the firm’s website only bothers to boast about four – YouTube, Spotify, Netflix and BBC iPlayer.

Catch-up is available on all pay-TV platforms as well as retail YouView boxes and Freeview’s new internet-connected service and the much trumpeted third tuner which allows more channels to be recorded than on YouView or Sky boxes has been matched by Humax’s new Freeview box.

What was supposed to be a premium offering is now just run of the mill and easily replicable.

Virgin is extending its network but the failure to sign-up so many of the homes already within its reach means it can only ever hope to win over a fraction of those who become eligible in the coming months.

While it’s relatively easy for Sky to persuade a Freeview home or a BT TV subscriber to add NOW TV to their telly line-up and boost their viewing options for just £7 a month, Virgin Media’s packages just aren’t designed to compete in this segment of the market.

And its chances of persuading vast numbers of pay-refuseniks or pay-lite homes to commit to premium priced packages is slight, especially when it lacks some of the content customers expect for the asking price.

Unless they want their TV numbers to continue sliding, Virgin Media bosses urgently need a way of addressing the dual squeezes on cost and content which the business now faces.

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Comments

  1. Wayne says

    They are losing TV customers because their interface is rubbish. Compared to sky it’s excessively laborious to find things and the ease of things such as on demand are not up to scratch. You can’t download on demand and watch it whenever you want. You have to go back through the app and ridiculous menu every time. The apps also take ages to open. I came to Virgin about 3 months ago from sky and I plan to return to sky as soon as possible.

  2. B Baker says

    They are losing customers because they do not look after their long term users. Offers are given to entice new people but once you have joined they don’t really want to know you. I had to reduce the programmes. I received to get the cost down as I was finding it difficult to meet the new payments

  3. robert says

    i have been a virgin customer for years. even before it was virgin.
    the internet is amazing, fast, reliable (who cares what customer service is like if you never need it)

    true the tivo interface is slow and laborious., but i don’t watch much tele

    cost medium tele (freeview plus a few sky channels), 165 meg internet and all phone call (24/7) costs about £55 a month.
    my sky bill used to be £106.00 a month

  4. says

    Yes long term customers are treated poorly/
    The Tivo box is slow and unpredictable-the sky box is far better/
    The whole service is overpriced.
    REEDEEMING FEATURE FAST BROADBAND ARGUMENT- NOT FOR ME
    SPEEDS THAT THEY QUOTE YOU WILL GET ARE JUST A HYPED SELL AND
    HOLD TACTIC THEY THROW AT CUSTOMERS.
    SPEEDS ARE NOT WHAT THEY SAY.

  5. robert says

    SPEEDS ARE NOT WHAT THEY SAY.

    true… i should get 150 down and 12 up
    in reality i get 162 down and 18 up

    i’m happy.

  6. Jim Wilson says

    I have been a cable user since telewest, I recently changed the package and found out they had signed me up for another year.

  7. Doug says

    Due to the usual incompetence at BT and its difficulty in installing internet on time on the agreed date, or the revised date, or the revised date after that, I have both BT and Virgin internet installed. Much to my surprise BT’s is twice the speed of Virgin’s.

  8. Ben says

    Pretty much what Wayne said. Also for people wanting to switch ASAP i think when Virgin puts their prices up in a couple of months we will have 30 days to switch for free even in the middle of the contract. I’ll be going back to sky even if it is a bit more.

    Although Vigrin is cheaper than Sky for me and their internet is decent their TV service is just very very poor. It’s very slow, it has to load when turning on from stand by, catch up channels aren’t integrated well like they are on sky so it has to launch catch up apps. The UI looks and is very outdated, It’s just text and menus everywhere, Sky keeps it simple and uses box art/covers for each show and movie so you can immediately see what they are instead of having to read text. The UI sounds the box makes is terrible, it’s like playing with a Leapfrog or Fisher Price toy with all the beeps and boops it makes..

    The apps are just pointless because the software and hardware is outdated. Simple apps like YouTube and Netflix take over a minute to load so i don’t bother anymore, Chromecast it is.

  9. James North says

    I have Virgin and agree with the above comments. I had it installed eight years ago, and have watched the cost steadily rise, but the level of service drop. My box constantly shows the purple buffering sign, takes ages to load, and the cost is way too high. Their broadband is good, and in my area works really fast, but their tv service lets them down badly. There are no new incentives to long term customers, we cannot change the packages without losing channels we want to keep, I watch tv a lot and use the HD channels, but you need the XL package to get their best level of service, which although cheap to begin with, soon becomes very expensive. My contract ends in July 2016, and I will certainly look around for a replacement to Virgin

  10. Sean says

    They are losing customers because they have the best Internet so people are just streaming from Netflix and droid boxes etc. Virgin tv might fail first but sky and bt won’t be far behind and at the end of it Virgin will still have the network. I think what has happened to print media in the last 10 years as news moved online is going to happen to the tv next as more content moves online.

  11. mike b says

    I pay £47 a month for 152meg broadband, the best I have ever got is 14meg download,
    really not worth the money, I am knocking it down to 30meg to see how that goes.

  12. Joe says

    Tivo does not even do Dolby Digital anymore. (It used to but it was removed for most customers about 6 months ago) There is a 400 post thread in the Virgin Media forum but Virgin Media have shown no desire to communicate with their customers or explain why features are removed. That is just one of many threads on the same subject. Tivo is very slow and there is a common fault going back years, that it randomly deletes large chunks of recordings for no good reason. Many people report poor picture quality compared to other suppliers too It really is not a good proposition, especially when the company does not listen to complaints. All customer services do is tell customers to reboot all the time. Tivo is also missing other key features such as dynamic epg that even comes with freesat and freeview. On demand and other “apps” take minutes to start and when they do you get constant “buffering”.

  13. Alan H says

    Mike B, 14 Mbit/s versus a claimed 150? You have something wrong there. Are you sure you aren’t being limited by your home wifi? Are you sure you are quoting megabits/s and not megabytes/s? I find Virgin speeds are pretty much what they claim.