Virgin Media: good news, and bad
Chris Forrester

Virgin Media presented its Q1 numbers yesterday (for the period to March 31) and they were perfectly acceptable, except when compared to BSkyB’s numbers issued last week! Virgin Media is having an undoubted success with record-low churn (of 1.1% per month), helped by the appeal of the BBC’s fabulous iPlayer service. But it doesn’t earn a penny from the BBC – or broadband subscribers – for what is an OTT service other than helping stickiness for its services overall.

Virgin said the company was in discussions with a number of HD programmers about adding up to six extra HDTV channels later this year, helped by further modest growth in TV subs to some 3.65m.

This was a quarter-year when Virgin Media’s staff could somewhat puff out their chests and claim credit for some positive progress, not least as far as operating income is concerned, which generated £13m of positive income (£2m loss this time last year).

Gross on-net customer disconnections of 160,100 in the quarter were down 10% sequentially and down 9% from the same quarter last year. As usual, churn is expected to be seasonally higher in the second quarter as compared to the first. “At the quarter-end, we had 611,900 V+ DVR subscribers. This represents a penetration level of just 17% of our digital subscribers. Based on our experience, VOD subscribers and V+ DVR users are less likely to churn,” said Virgin.

VOD usage grew nicely during the quarter, with 53% of customers using the service (46% this time last year). Virgin also reported its highest-ever average monthly VOD access of 55m during this first quarter. Subscribers to its V-Plus DVR service reached 611,900 at the end of March, compared with 521,500 at the end of December. All praiseworthy.

But then its numbers start rolling downhill. For example, the cablenet added just 7,100 new customers, although the TV side of the business added a net 30,600 new viewing homes. There’s nothing at all ‘wrong’ with these numbers, except that last year’s numbers were larger, and this current quarter saw a 13% fall on the pre-Christmas period. Last week BSkyB added a spectacular 80,000 net new subs for its Jan-Mar trading, and saw HD premium subscribers to its 32-channels of HDTV pass the 1m mark. Virgin’s single HD channel, and a promise of jam tomorrow with 5 as yet unnamed HD channels, seems a poor effort. On the plus side Virgin has added 270 hours of HD material to its VOD system.

Sky’s results also showed that its subscribers are spending more, while Virgin’s subs seem to be tightening their belts. Virgin Media’s CEO Neil Berkett admitted that the economic downturn is – at least in part – affecting his business, and contributing to a slow-down in expansion. "It's harder to get new customers than it was," Berkett told Reuters. "Because there's less people entering the market, but we've got a stronger product set than we ever had."

Berkett revealed that Virgin’s ‘Sit-Up TV’ operation was sold off on April 1 (and thus any revenues gained do not appear in these numbers).

Virgin Media had revenues of £935.7m for Q1, down on last year’s £947.3m. This helped contribute to a net loss, which widened to £154m from a net loss of £104.4m last year.