Virgin Media turns up the television volume to transform its neglected pay-TV business
For a company calling itself Virgin Media, it has been a long time since Britain’s number two pay-TV operator had much to say about television.
In the three years since the company became the £15bn jewel in John Malone’s European cable crown, pipes rather than poetry have been the top priority. Virgin Media’s chief executive, the Kiwi News Corp veteran Tom Mockridge, has slashed operating costs while boosting investment in its broadband service to ensure it maintains a speed lead over BT and Sky as an internet provider.
In the meantime, Virgin Media’s television business has suffered. While its rivals went to war over Premier League football and attracted tens of thousands of new subscribers each quarter, the cable operator’s pay-TV business went into decline.
Mockridge has called on an old ally to stop the rot. David Bouchier, now his chief digital entertainment officer, worked with him a decade ago on the creation of Sky Italia and is now tasked with reinvigorating Virgin Media’s pay-TV business.
“Tom said he had some challenges in TV and asked me to come and look at them,” says Bouchier. “I’ve been in the post just over a year now and it has been a root and branch re-evaluation of the television proposition.”
Liberty Global, Malone’s European cable holding company, is widely viewed as a sharp financial operation and a good investor in cable networks, but not necessarily expert in what viewers want on screen. It’s a perception Bouchier plans to defeat.
“They are the best cable operators outside the US, no question,” he says. “That doesn’t mean they are not able to invest in making the pipes sing, which is what we’re in the business of doing. That is the focus for the year.”
In truth Virgin Media began a retreat from television years before its takeover by Liberty Global. It pulled out of programme making and sold off its 50pc stake in the Dave broadcaster UKTV as its previous management slimmed down the company to make it a more attractive deal target.
It worked but it was strategically questionable. Soon after Virgin Media stopped making programmes in favour of becoming only a reseller, Sky began pouring money into original productions and exclusive drama to lock in subscribers. The stakes have only got higher with the arrival of Netflix and Amazon as major funders of programmes.
Bouchier has begun to get Virgin Media back in the game. So far he has acquired two exclusive American dramas, the schlocky horror Ash vs Evil Dead and Kingdom, a gritty mixed martial arts series.
There is much more to come, he says, but first Virgin Media needs to update its neglected set-top box. While others have invested in quick-fire upgrades, the cable operator has relied on more or less the same system for years. Compared with rivals it now looks clunky, with unintuitive text-based menus that load slowly, Bouchier admits.
That will all change, he adds, beginning this week. The user interface will get an overhaul to make its menus slicker and more picture-based.
Then a series of updates will deliver new features to help subscribers navigate Virgin Media’s vast array of programming. Thanks in part to a more open approach to potential rivals than Sky, Bouchier says they can be overwhelmed by choice.
“In movies we have all of Sky, plus other à la carte service like Curzon and the BFI. We take Sky’s position as our starting point then add to it,” he says. “We are not like Sky, where it has a walled garden and says because we have invested so much in our own content that we see other services as potentially a threat. I see them as an opportunity.”
Most notably, Virgin Media has allowed Netflix into its set-top boxes, a move some in pay-TV see as a dangerous bear hug with an internet player that in the long term wants to supplant them. Bouchier says he is not concerned.
“We are 100pc committed to our customers in the UK. Netflix isn’t. They have to try and find a creative sweet spot appealing to everyone across the globe. There is no precedent for that.”
There will be more software upgrades for the Virgin Media Tivo set-top box over the year, including one that will introduce a feature now in pilot testing that the company is calling series link plus.
It will allow subscribers to record every episode of a programme as the familiar series link feature does, but will also pull in on-demand episodes from Netflix and other sources to create a more complete library.
While the existing fleet of 3.7 million set-top boxes will be improved this year, the company is also preparing bigger technological steps.
At the turn of the year it will launch a new set-top box to rival Sky Q, with ultra-high-definition pictures and a similar ability to sling programmes to tablets and smartphones around the home. Beyond that, there will be a major overhaul of the ageing plumbing that powers Virgin Media’s broadcasting, to allow it to shift to Liberty Global’s next generation distribution system, Horizon, which is already in use elsewhere in Europe.
Bouchier is clear that on-demand programming on multiple screens is “the future of our business”.
So he has no time for the BBC’s refusal to allow Virgin Media or Sky to deliver licence fee-funded programmes via their mobile apps, alongside rival programming. The corporation insists that only the iPlayer app can show The Night Manager on a iPad, much to the frustration of its pay-TV distribution partners.
“Sky and us are absolutely at one on this and I struggle to understand why the BBC should be fighting us,” says Bouchier. “There’s no excuse for that, James Purnell notwithstanding, there is no rational explanation that can be given for it.
“They have chosen an arbitrary position on iPlayer. They sold off their transmitter network years ago, but they are saying we are now the walled garden of BBC programming, which you and I pay for in our taxes. That can’t be right. It’s an untenable position and at some point the BBC will have to see sense.”