Sky Basic Channels Pulled from Virgin Media

LONDON, March 1: BSkyB’s five basic channels were pulled
from Virgin Media last night after the two companies were unable to come to an
agreement on the terms of a new carriage deal.

As a result, Virgin Media’s 3 million subscribers have lost
access to Sky One, Sky Two, Sky Three, Sky News and Sky Sports News. Virgin
Media had claimed that Sky had doubled its fees even though the popularity of
its channels had fallen by 20 percent in the last three years. After
negotiations broke down on Tuesday, Virgin Media suggested an arbitration,
which Sky rejected. Virgin Media said Sky’s rejection of the proposal came following
a personal call to Sky chief James Murdoch by Virgin Media's chairman, Jim Mooney,
and CEO, Steve Burch. Commenting on the dispute, Burch, said: "We're
disappointed but not surprised by this outcome: nothing Sky have said or done
in the course of the negotiation indicates they had the slightest interest in
doing a commercially viable deal. Their action here is consistent with their
plans to withdraw their free channels from Freeview and, in our view, reflects
their desire to limit consumer choice."

Richard Branson added: “When Virgin Media launched last
month, we promised to put the power of the entertainment industry back in the
hands of U.K. consumers, giving them the service they deserve and the value
they'd expect. Consumers have my whole-hearted assurance that Virgin Media will
not allow this dispute to prevent us from giving them the freshest and most
exciting TV service in the U.K. With Virgin Central and our massive library of
on-demand, programming, there's a lot to look forward to."

Sky, meanwhile, in a notice posted on its website, stated:
“Virgin Media have decided to drop these channels from today. This was their
decision. As a "closed network" only they can decide what to offer
their customers. Up to the final hours we tried time and again to reach a
solution, including proposing a way for Sky to retail channels directly to
cable customers in a way that would cost Virgin Media nothing.”

Sky is asking Virgin Media customers who want the five basic
channels back to switch over to the satellite platform. “It’s easy to join Sky
and keep the TV you love,” the platform said. “We want to do everything to make
sure you can keep up with your favorite Sky programs so we’re planning to run
all our big shows over a catch up weekend. And we’ll make other shows available
on our Anytime on-demand service.”

Virgin Media says that the money it saves from not carrying
the five channels will be used to boost its programming acquisitions; the cable
platform has already amassed 2,700 hours of content for its VOD service,
including Nip/Tuck and Lost, both of which air on Sky One. Virgin Media says it
will expand its VOD service to more than 6,000 hours by year-end.