Updated: Virgin Broadband Growth Slows, Still Fancies Subscription Music

Broadband sign-ups have slowed markedly for Virgin Media (NSDQ: VMED) in the last year as the market becomes saturated . Whilst the provider signed up 106,200 broadband customers between October and December 2007, in the same period last year additions were just 57,100, today’s Q4 earnings show.

The results explained: “We believe gross additions were down partly due to slower growth in the overall broadband market and our shift in focus towards growth in higher (value) tiers” – ie. concentrating on 20Mbps and 50Mbps, which is expected to be nationwide by Q3. Under CEO Neil Berkett, broadband has become Virgin’s main selling point. It now has a record 3.68 million broadband and broadband revenue for the quarter grew 6.3 percent to £3.93 million.

Updated: Berkett, in the analysts’ call (via Guardian.co.uk): “I think we will explore different business models about how we can create other financial revenue streams outside subscription and we will do something in that space in 2009. That could be doing a deal with a music house … that could be doing a deal with targeted advertising, [but] there could be other ways to monetise the pipe outside the traditional subscription. We have a great brand in the music space and I would like to do something breakthrough. What Sky’s done is not breakthrough; I am comfortable we will do something different”.

As we reported, Virgin last month scrapped plans to start a legal P2P music service with Playlouder over last-minute label concerns. Berkett’s reluctance to build “more than a me-too subscription service” suggests he’s still hoping to be as innovative…

Results: Overall group revenue was down 1.7 percent from the year before to £1.03 billion, thanks to “reduced business, off-net and mobile revenue”. But operating losses ballooned from £18 million to £50 million, after Virgin was forced to cut £54.8 million from the value of its Sit-Up shopping channel network, which failed to win a second Freeview slot last month.

The earnings gave Virgin another opportunity to trumpet its VOD successes – now used by 52 percent of TV viewers, with an average 53 million views per month. Fifteen percent of TV customers (521,000) now take the V+ HD DVR box. Still, TV customer additions slowed to 44,500 from 61,100 the year before. Virgin’s VMtv and Sit-Up TV channel makers saw 10 percent more ad revenue, outperforming the market, and benefited from the restoration of BSkyB’s channels.

Results | Webcast (1pm GMT)