This one will run and run...
Virgin Media Continues to Challenge Anti-Competitive Behaviour by Sky
Following Sky's withdrawal of its basic channels from Virgin Media's (NASDAQ: VMED) TV service, Virgin Media has formally advised Sky that it will pursue action in the high court if their carriage disputes are not resolved within 30 days. This comes on the heels of Sky's rejection of an offer by Virgin Media to have the matter resolved through legally binding arbitration by an independent expert.
Virgin Media is challenging the pay TV giant for its abuse of dominance.
The remedies sought will include supply of Sky's basic channels at a reasonable commercial rate, as well as fair payment for Sky's carriage of Virgin Media TV channels, such as Living and Bravo. Virgin Media will also seek damages if the dispute is not resolved.
Commenting on Virgin Media's position, CEO Steve Burch said: "We are not interested in prolonging this dispute any longer than necessary but we will not allow Virgin Media or our customers to be the victim of Sky's market power. In the interest of the consumer, we want these issues resolved quickly."
Virgin Media has chosen to publicise its actions today because, given ongoing media coverage of this issue, consumers have a right to understand more about the facts behind the headlines and what Virgin Media is doing to put things right. The numbers behind Sky's pricing proposals speak for themselves and reveal the extreme nature of their behaviour.
Historically, Sky and Virgin Media have each retailed the other's channels to their customers: Virgin Media TV channels, such as Living and Bravo, have been retailed by Sky to its customers; and Sky's basics channels have been retailed by Virgin Media to its customers.
In the past few months, Sky has demanded nearly double the price for its basic channels (whose popularity is declining), while forcing a dramatic cut in the price it pays for Virgin Media TV's channels (whose popularity is increasing). More specifically:
- In Virgin Media homes, the viewing share of Sky's basic channels has fallen by about 20 percent over the last three years. Despite this, Sky has demanded that Virgin Media pay nearly double the existing arrangement for retailing the channels. Sky has sought to increase the fees to about GBP48.5 million per year (including some GBP8 million for some ancillary services)
- In January, despite a 15 per cent per cent increase in the viewing share of Virgin Media TV's channels over the last three years in Sky homes, Sky forced Virgin Media to accept an 85 per cent reduction in the price it pays for the channels
- Even when adjusted for the Sky basic channels' marginally higher share of total viewership and its larger subscriber base, Sky is demanding an annual price per subscriber some 1700 percent higher than it pays for the Virgin Media TV channels
This gaping disparity in channel valuation is the hallmark of Sky's systematic abuse of dominance and their longer term objective of suppressing existing and emerging competition from other companies. Throughout both sets of negotiations, Virgin Media have proposed relatively small adjustments to the status quo (mostly in Sky's favour). Sky, by contrast, have consistently tried to use their market power to fundamentally change in their favour the dynamics of the pay TV market.
Sky's premium sports and movie channels are not part of this dispute and remain available to Virgin Media's customers.
