Virgin secures new Sky carriage deal after VMtv sale

A £160 million (€191.5m) agreement between BSkyB and Virgin Media over the sale of its Virgin Media Television (VMtv) channels has been topped by new agreements covering basic, HD and VOD channels.

Sky will pay an initial £105 million for the portfolio of VMtv channels that includes the former Flextech brands of Living, Bravo and Challenge. The remainder will be paid following the regulatory process. Virgin 1, once known as FTN, is also a part of the deal, but will be rebranded or closed, as the Virgin name will not be licensed to Sky. The rebranding of the channel in February 2008 was much heralded, but Virgin 1 was never able to live up to expectations, and its most valuable asset remains its slot on the terrestrial platform Freeview.

Sky will take responsibility for selling advertising on the VMtv channels from January 2011. Sky will take responsibility for selling advertising on the VMtv channels from January 2011. The complete portfolio currently comprises Living, Living it, Challenge, Challenge Jackpot, Bravo, Bravo 2 and Virgin 1.

New carriage agreements have been reached for the wholesale distribution of Sky’s basic channels including Sky 1 and Sky Arts over the Virgin Media cable platform. For an additional fee Virgin will also be granted carriage to the HD versions of Sky’s basic HD channels, Sky Sports HD 1 and Sky Sports HD 2, and all Sky Movies HD channels.

Content from the Sky portfolio will also be made available through Virgin’s on demand service and to content carried by Sky on its Red Button service. For example the middle portion of Sky Sports’ coverage of the One Day International Cricket match between the West Indies and South Africa was moved to the Red Button so that a T20 county game could be shown on the linear channel. Virgin will also be able to distribute some content over the internet.

“VMtv is an attractive investment opportunity which complements our existing content business and delivers strategic and financial benefits.  We are pleased that, through commercial negotiation, we have been able to ensure wide distribution of our channels to a growing pay TV universe,” said Sky CEO Jeremy Darroch.

The sale and wide-ranging carriage agreements are a far cry from the bitter 18-month dispute that saw basic channels Sky 1 and Sky News removed from Virgin homes. It ran alongside the long-running pay-TV inquiry conducted by the regulator Ofcom that lead to the proposed wholesaling of Sky’s sports channels.

With the sale of its content division, Virgin Media has placed itself firmly in the pipe, rather than the entertainment business, but CEO Neil Berkett says the sale has generated substantial value. “Together with the new commercial agreements we’ve announced today, it will allow us to focus more closely on our strategy of exploiting Virgin Media’s super-fast connectivity to offer our customers a range of the very best content through a highly versatile next generation entertainment application.”

Completion of the agreements is conditional on obtaining merger control clearance in the Republic of Ireland.

For the time being Virgin Media is holding onto its share of the UKTV 50/50 joint venture with BBC Worldwide.