So much for Sky holding Virgin Media’s arm over the fire – the two have just agreed a deal that will see Sky’s basic channels return to the cable platform from next Thursday, November 13. The spat began in February 2007, when Sky yanked its channels after trying but failing to get Virgin to pay more for the privilege. Now Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts 1, Sky Arts 2, Sky Real Lives and Sky Real Lives 2 will return to Virgin, while Virgin’s own channels Living, Living 2, Bravo, Bravo 2, Trouble, Challenge and Virgin 1 will be reinstated continue on BSkyB (NYSE: BSY) – both deals run to 2011.
Revised carriage fees, which were at the heart of the dispute, were not disclosed, except to say (via release): “The agreements include fixed annual carriage fees for the channels with both channel suppliers able to secure additional capped payments if their channels meet certain performance-related targets.” But it’s likely Sky will have had to accept less than it wanted first time around. The loss of Virgin’s 3.5 million TV customers was never in the interest of Sky’s advertisers – now the ad recession is biting, Sky needs to offer them as much reach as possible. One big stick that helped – Ofcom’s intention to force Sky and others to offer channels at fair wholesale rates.
Sky’s fall-out with Virgin was just one of many spats since between the two – Virgin complained to both Ofcom and the Competition Commission over BSkyB’s pay TV power and ITV (LSE: ITV) share respectively. Sky, though, has lost on both counts the competition case, was dealt a blow by Ofcom’s channel ruling, has cancelled postponed plans to launch its own Freeview offshoot Picnic and, with the consumer downturn threatening pay TV subs, needs to shore up its channels audience. Both sides issued press releases full of pleasantries today and High Court action was promptly dropped.