Virgin faces customer exodus over Sky battle
Virgin Media admitted today that its battle with Sky over TV rights made it suffer in the broader convergence war.
During the firm's quarterly earnings call, chief executive Steve Burch told investors that although the impact of losing shows like 24, Lost, and The Simpsons was not big in the first quarter, he was expecting more trouble over the next three months.
"We're not really sure what the impact in Q2 will be, but we're flagging up the possibility that TV additions may not be as strong and could be negative," he said.
Virgin only lost the Sky channels on 1 March, and disconnections take 30 days. To have an impact on these results, which run to 31 March, angry customers would have had to quit Virgin before the switch-off.
In Q1 the overall five million-plus customer base across TV, mobile, broadband, and home phone shrank by 47,000 customers. Despite a £25m marketing and rebrand splurge, Virgin's consumer revenue slid to £637.3m from £644.4m the previous quarter. It blamed the slip on its shrinking subscriber base, and a drop in how much each customer spends on average (ARPU).
Burch fingered Virgin's fixed line telephone arm as being particularly feeble, and weak enough to scratch out the boost in ARPU which higher penetration of triple and quad-play bundles should have delivered.
Business revenues dropped too, from £168.8m in Q4 2006 to £163.0m for the first three months of this year. The combined result was an operating loss of £15.3m, compared to a £9.2m profit last quarter.
There were some diamonds in the rough. The broadband spike of Virgin's four-pronged assault performed better, adding 97,600 new punters in Q1. The rollout of 20Mb/s and trials of 50Mb/s continued, which Virgin noted is an example of its "inbuilt advantage" as cable monopoly holder. BT's 21CN will max out at 24Mb/s for customers lucky enough to live close to an exchange, and will not be complete until 2011. The national telco has complained that it is not economical to lay faster lines because regulations force it to open its network to competitors.
More than 3,410,000 broadband connections are now supplied over cable, compared to about 3.2 million dealing with BT Retail. Virgin's recent decision to roll out stringent bandwidth throttling across the national network could drive departures, however.
Virgin also managed to reduce its churn slightly, from 1.7 per cent to 1.6 per cent, though several observers have noticed this is still some way off Sky's customer-retention rates.
Virgin maintained its stance over the TV dispute with Sky, which is now headed for the High Court. "Should Sky want to come back and negotiate in good faith we are open to that," Burch said. The clash over how much Virgin should pay for Sky channels has been interpreted as first blood of a long campaign in the converged services market.
Virgin's earnings report is here. ®
Virgin v Sky - I chose both!
You can have both Virgin and Sky!
I was on the Virgin 3 for £35 deal - as a long term customer incredibly peed off with losing Sky One I had Sky installed the Saturday after Virgin withdrew Sky One and then rang BT to switch from Virgin to them and then spent 59 minutes on hold to speak to VM to cancel all my services.
However, Virgin are quite desperate to keep customers and they offered me a much better deal rather than lose my custom altogether - £19.95 gives me broadband and telephone but with free daily, evening and weekend NATIONAL calls and a discount on International and mobile calls and they let me keep the TV box for free and installed it in my bedroom free of charge.
So I am staying with VM with tv (M), phone and 2mb broadband and the free calls cost just £19.95 so even with my £15 a month Sky subscription I am quids in as I am saving approx £10 a month on calls (dont use the phone a lot) and I get more channels Sky One, Two and Three as well as the kiddie channels that are on the VM XL package which I could not afford.
I have also joined the VM mobile contract for £10 a month - 300 minutes of calls and 300 texts, a great package for me.
So ring VM and tell them you want to leave and renegotiate your deal - my sister, her best friend and my parents have all done the same!
They dont want to lose you so give it a try!!!!!
You can still have Sky as well - they want you to connect your box to a landline as the box occasionally calls Sky. But VM assure me you can connect it to your VM line and Sky wont know the difference unless Sky can find out from BT which is unlikely as its against the data protection act.
If you dont connect your Sky box to a phone line within 8 weeks then Sky charge you a one off payment of £25 which is basically the installation fee that they waived but VM have said that if I do get charged this they will pay half of it!
So with the war of words going on who knows who is right? But I hope that both parties gets their facts and figures right becasue I have not 'switched' from one to another, I have both! And I love VM with their on demand service - I can watch a lot of programs when it is convenient to me (just wish Channel 5 was one of the channels!).
Thank you Mr Branson for screwing things up, as a customer I am getting a lot for my money because of your mistakes!
Re: Over time Sky can be more expensive
This is getting like forum rants, but hey :-)
"1. To have a Sky service you need to have a BT landline and pay the rental on that in addition to the Sky payments. With VM the line rental is included."
Firstly you don't need to have a BT landline. It's only a requirement for the pay elements of the interactive services which few ever use, and you only need a phone line not specifically a BT line. In fact I had an NTL line for a while when I got my Sky dish back when NTL's offering was a complete pile of tosh. Only went to BT when I gave up with NTL's useless broadband.
Secondly, this is a common false comparison. The cost is the same like for like comparing inclusive NTL or Sky+BT, for similar packages... oh wait, but you don't get Sky channels any more with VM ;-)
"2. You have to purchase the Sky box (I know the basic one is normally free with the deals they do, but the Sky+ box cost £199 when I was checking this). VM own all the boxes so there is no extra charge."
Valid point, though you can source Sky boxes cheaper. Last point is also relevant as with Sky boxes it's yours for life. VM boxes are not yours so you can't sell them on (relevant with the more valuable Sky+ and SkyHD boxes).
"3. To use the Sky+ features you have to pay an additional monthly charge (£10 last time I looked). VM charge £15 , but this is for the service and hardware rental."
in other words, VM charge £5 a month for rental. Over a few years you've paid the same as buying a Sky+ box, and after that you're throwing money down the drain.
"4. If anything goes wrong with the Sky box after your 12 months you have to pay around £80 to have it fixed (ie. replaced with a reconditioned one). With VM as they own the box it is down to them to fix it."
Yep, that's the benefit of rental. I wonder why the rental TV market has pretty much collapsed however? ;-)
"5. Although you own the Sky box there is not much you can do with it if you don't want to be with Sky anymore."
You can use it as a freeview box if you get the freesat card thing I believe. You can also sell it.
"6. Living in a tenement block means that it would cost an extra £200 to have a Sky dish fitted. Telewest only took a couple of hours to fit the cabling (including extra rooms at no extra charge - so we can move the box between the rooms)."
Most restrictions in flats are down to council and block rules that require you to use communal dishes.
"7. The V+ box is better than the current Sky+ box. It has 1 more tuner (recording 2 programs and time shift on a third)."
Sky+ does record 2 channels and let you watch something time shifted. However what you mean is V+ will let you record 2 and watch a third live feed as it has a triple tuner.
Sky+ dishes however have typically 4 feeds so can in theory record 4 at the same time.
Not that any of this is required, as any TiVo owner knows the nature of a PVR combined with the amount of repeats and +1 channels means you rarely if ever get a conflict or even need to watch live TV anyway. Though TiVo is somewhat better than both Sky+ and V+ in it's ability to do this, and it works on all platforms (but sadly isn't HD in the UK).
"8. Faults are present with the services of both companies, and this changes on a regular basis. It can not be used to choose between them. (I know technical support staff for both companies)"
You choose based on personal experience and recommendations. Going on the "I know" factor, most people I know with NTL experience shudder in terror at the very name. I hear few complaints about Sky by comparison. However I foolishly picked NTL at first. I learnt my lesson.
However this is never representative. People voting with their feet (or wallets) is however, and if VM are losing customers, well...
Over time Sky can be more expensive
I have been with Telewest and now Virgin for several years on their lowest package. The only extra that I have is the Telewest TVDrive (V+) box. I have also looked into getting Sky (using a employee only deal) and found it to be more expensive. The reasons for this are as follows:
1. To have a Sky service you need to have a BT landline and pay the rental on that in addition to the Sky payments. With VM the line rental is included.
2. You have to purchase the Sky box (I know the basic one is normally free with the deals they do, but the Sky+ box cost £199 when I was checking this). VM own all the boxes so there is no extra charge.
3. To use the Sky+ features you have to pay an additional monthly charge (£10 last time I looked). VM charge £15 , but this is for the service and hardware rental.
4. If anything goes wrong with the Sky box after your 12 months you have to pay around £80 to have it fixed (ie. replaced with a reconditioned one). With VM as they own the box it is down to them to fix it.
5. Although you own the Sky box there is not much you can do with it if you don't want to be with Sky anymore.
6. Living in a tenement block means that it would cost an extra £200 to have a Sky dish fitted. Telewest only took a couple of hours to fit the cabling (including extra rooms at no extra charge - so we can move the box between the rooms).
7. The V+ box is better than the current Sky+ box. It has 1 more tuner (recording 2 programs and time shift on a third).
8. Faults are present with the services of both companies, and this changes on a regular basis. It can not be used to choose between them. (I know technical support staff for both companies)
As for service they seem to be copying each other all the time so anything that one of them has the other will have soon enough.
My tip is to work out the cost over several years (expecting to have at least 1 or 2 faults with the hardware). Also remember to look into any extra charges that are not listed but you need to pay for (eg. line rental, fitting, and upgrade costs). For some Sky might work out cheaper for others it will be Virgin.