LONDON: UK cable provider Virgin Media appears to be paying dearly for the bitter spat with satellite giant BSkyB over distribution fees, and its consequent dropping of the latter's TV channels.
Or so claims a report by investment bank UBS, which estimates that Virgin (formerly known as NTL) could lose up to 400,000 customers as a result of denying them access to Sky's channels [WARC News: 26-Feb-07].
UBS also found that: "Sky subscribers have a low opinion of Virgin and do not regard it as a credible alternative." In addition, says the report, "Virgin customers . . . believe that many aspects of Sky's service are better than that provided by Virgin."
Of the 1,000 households surveyed for the bank by GfK NOP after the eruption of hostilities between the two companies, 45% of Virgin's TV customers claimed they would switch provider if they could, while 10% planned to quit as a direct result of the removal of the Sky channels.
UBS concludes "Virgin would have been better off accepting Sky's offer of a £16 million ($31.6m; €23.5m) increase in the cost of these channels, and would still be better off accepting Sky's most recent offer of £35m per year, or a £13m increase."
The embattled Virgin has, unsurprisingly, come out fighting. Says a defiant spokesman: "As we have said, the full impact of the loss of Sky's withdrawal of its basic channels will be seen in the second quarter. . . . Based on actual customer behaviour to date, we believe TV customer losses have been contained to a fraction of that suggested by UBS."
Data sourced from MediaGuardian.co.uk; additional content by WARC staff