Examination of Witnesses (Questions 1061
- 1079)
WEDNESDAY 28 NOVEMBER 2007
Mr Malcolm Wall, Mr Paul Richmond, Mr Jon James and
Mr Scott Dresser
Q1061 Chairman:
Welcome, thank you very much indeed for coming. Mr Wall, we will
perhaps address our questions to you and if you wish to bring
your colleagues in, please do so. I should mention incidentally
that rather than going through the declarations of interest, we
have got a list of declarations of interest which are on the side
over there. Just tell us a little about cable, because of course
you do not yourselves produce the news itself.
Mr Wall: No. Thank you, My Lord Chairman, we
welcome this inquiry and this opportunity to address you. Virgin
Media was formed out of the merger of NTL and Telewest in March
2006; later in that year we acquired Virgin Mobile and with it
the naming rights, and we relaunched ourselves at the beginning
of 2007 as Virgin Media, offering pay television, broadband, fixed
line telephony and mobile telephony; we are the only quad player
in the UK. We have about 4.8 million subscribers across those
services and, to address your particular point, we are more of
an aggregator of content than an owner; however, we do own some
channels, we own a bouquet of channels that are probably not known
to many of you given their particular targeting of Living TV,
Bravo, Trouble and Challenge. They are wholly owned channels and
we own some retail channels, some television shopping channels,
and we are a joint venture partner with the BBC on a range of
UKTV channels—UKTV Gold, Style and others. In provision
of news we are a carrier of other news services through a set
of commercial arrangements.
Q1062 Chairman:
You have about 3.3 million television customers, do you?
Mr Wall: Indeed.
Q1063 Chairman:
We were in the United States and cable is very popular there.
I am not saying 3.3 million is not a big number, it obviously
is a big number, but it does not seem to be as popular in this
country as it is in the United States; why is that?
Mr Wall: It is certainly not as popular and
we are very much the number two in the pay television market behind
Sky. I will give you a personal opinion rather than a Virgin Media
opinion; I think it is a function largely of the way cable was
set up in this country, which was on a regional franchise basis
with over 50 companies. Franchises were applied for and awarded—Greenwich
Cable, that sort of size of domain—and the vision for cable
at that time was very much a community focus. Since those days
there has been a series of consolidation and with that consolidation
a series of financial restructures which have put cable in a very
much secondary position in terms of being able to offer a nationwide
offering, in contrast to Sky who adopted different technology
and were able to move very quickly because they were a single
service to the whole of the country whereas we were very much
a fragmented service across the urban population where the cable
economics are such that you can really only get a return on the
cable investment, the laying down of the cable, in urban areas
or concentration of population.
Q1064 Chairman:
Have you conducted research into the importance that customers
give to news channels in your television packages?
Mr Wall: We monitor both how they behave—that
is to say their viewing—and what proportion of total viewing
is taken up by the news channels. We also regularly do some conjoined
analysis to have a look at our customers' attitudes towards the
individual channels and in fact the value they place on those
channels—I do not mean an economic value but I mean in terms
of how they feel towards those channels compared to other channels.
News is relatively limited as a proportion of total viewing. We
offer the following news channels on our television platform—BBC
News 24, BBC Parliament, CNN International, Bloomberg, CNBC and
EuroNews. Up until February of this year we also offered Sky News,
but in a well-documented and very public spat with Sky we failed
to reach commercial terms with Sky across a number of their basic
channels. We do not offer any payment to any news channel and
we were not offering payment to Sky News as a service; we were
however offering or giving payment to the other parts of their
basic service. They have withdrawn Sky News as part of that dispute,
despite the fact that we obviously were not changing our terms
with regard to Sky News.
Q1065 Chairman:
Do you think that that dispute is connected with the other dispute
concerning the shareholding in ITV?
Mr Wall: Only Sky can answer that. We have been
competing vigorously with Sky across all fronts.
Q1066 Chairman:
That sounds pretty vigorous competition to me.
Mr Wall: It is vigorous competition. We believe,
and have made this case in a number of fora, that they have a
market dominant position that they wish to protect and they have
gone out of their way to act against us in a manner that we regard
as unlawful.
Q1067 Chairman:
Whether it is unlawful or not certainly you would regard it as
unfair.
Mr Wall: Certainly.
Q1068 Chairman:
The non-access to Sky News, is that something which your customers
have suffered from and have actually changed their habits as a
result of?
Mr Wall: Prior to the Sky News service being
withdrawn from our platform, Sky News was the second most popular
news channel; in fact, if you put Sky News and BBC News 24 together,
they accounted for some 90% of the total news channel viewing
on our platform.
Q1069 Chairman:
But number one was?
Mr Wall: Was BBC News 24, secondly was Sky News
and thereafter CNN, BBC Parliament and so on with relatively minor
viewing. We can provide all this data in more detail if you would
so wish. Subsequently what has happened is that since the loss
of Sky News we have seen a big swing over to BBC News 24; it would
be fair to say almost all of the viewing that has been lost from
Sky News has transferred over to BBC News 24. We regret this because
in my mind that means we are not able to offer our customers the
choice we were beforehand.
Q1070 Chairman:
So you do not think any switch has taken place simply because
of the news, the lack of Sky News, but has any switch taken place
at all, have you lost customers because of not actually producing
the Sky package?
Mr Wall: There is little evidence to support
the suggestion that we have lost customers because of the loss
of Sky News. Our quarter two results demonstrated that we lost
customers and, without a doubt, the loss of Sky One, the entertainment
channel, played a significant part in that. What we have done
is done everything we can to extend to our customers a new range
of entertainment services, we have particular developed a video
on demand offering to try and compensate for that, but some of
the programmes that Sky One has have a certain level of loyalty.
We had a loss and subsequently on quarter three I am pleased to
say that we have gained new customers.
Q1071 Chairman:
Presumably Sky would say that they have increased the price but
that is what happens.
Mr Wall: Indeed, that is what Sky have said,
that they place a certain commercial value on their channels;
we have placed a commercial value on their channels and we have
failed to agree.
Q1072 Chairman:
You do not see any prospect of actually agreement taking place.
Mr Wall: We have maintained dialogue, thankfully
not in the public eye, since the initial dispute and we continue
to look at every which way of getting the Sky channels back on
our platform within reasonable commercial parameters and on a
fair and non-discriminatory basis.
Q1073 Lord Maxton:
Yes, you have lost customers—I am a customer and I make
that clear. I however threatened to go to Sky and was offered
a better package at a lower price; is that what you did?
Mr Wall: Indeed, and the cost to Virgin Media
of the loss of the Sky basic channels has been interpreted by
external analysts as the number of customers we lost in quarter
two, but as you illustrate the cost has been greater to us because
we did everything we could to retain customers, both by investing
in our video on demand and in enriching our overall television
offering, but in some cases making counter offers in terms of
the value of the package we offer you.
Q1074 Lord Maxton:
You lost four Sky channels but there are other channels which
Sky provide which you do not, and I will give you two: BBC Wales
and S4C. You may wonder what on earth I want to watch either BBC
Wales or S4C for, but if you happen to follow Scottish rugby it
is actually the only way you can watch Scottish rugby, it is on
either BBC Wales or S4C. Why do you not provide those?
Mr Wall: First of all as a rugby man I full
understand your desire to watch rugby. We have band width constraints
and we are running about 150 channels. Sky do not have those band
width constraints. We have to make choices regarding which channels
we offer and they are very often difficult choices.
Q1075 Baroness Howe of Idlicote:
I just wanted to follow up the point you made about in some cases
offering different or additional pluses to remain. Could you just
expand a bit on that, to whom are you making these?
Mr Wall: What we have done during the course
of this year is evolve our television offering. As your colleague
pointed out, we offer less channels but what we can do with our
technology is offer our customers access to a large library of
programmes in which they go in through the user interface and
select programmes to watch rather than selecting channels to watch.
As of today we have got 3700 hours as a library—I do not
like to use the word, it sounds rather dry—a library of
programming, which is a mixture of catch-up television, television
you could have watched in the last week, films which you pay for
and then a large library of television and indeed lifestyle programming,
we are putting some education on there as well but we are increasingly
looking at travel videos and a much richer offering than normal.
Q1076 Baroness Howe of Idlicote:
I was not after that, which seems perfectly logical, I was picking
up a hint that you might be offering exceptional packages, perhaps
to people who complained.
Mr Wall: We offered exceptional packages to
people who complained and that was more to do with the cost of
the package rather than a very different type of product offering.
Chairman: We will move off that and we
will also move off Scottish rugby, just for the moment if we may.
Lord Inglewood.
Q1077 Lord Inglewood:
Mr Wall, in the written submission you gave to the Committee you
described a number of ways in which you feel that owners can either
directly or indirectly exercise influence over the form of news
and then you go on to quote a couple of instances, one that I
call the Borneo example and another one relating to the stories
carried about Mr Murdoch and the prime minister on 19 July this
year. Nevertheless, you say it is clear that in general media
owners have influenced editorial priorities, fairness and accuracy
and so on, and you have given us two instances. Do you have a
great dossier of substantive evidence to back up that proposition,
or is it based on a much more nebulous analysis of the way the
world works?
Mr Wall: If I may I would challenge the word
nebulous. There is a strong set of anecdotal evidence and it is
very hard to go much beyond that to provide any empirical evidence
by the very nature of the argument, but I think there is considerable
anecdotal evidence and, furthermore, Rupert Murdoch has admitted
the role of the traditional proprietor publicly.
Q1078 Chairman:
To this Committee.
Mr Wall: Indeed. Over and above that though
we believe there is a natural element of what I would almost call
negative control, that is to say you have to be a strong-minded
employee to fly in the face of the publicly-stated owner's views
and we believe there is considerable anecdotal evidence to support
the fact that the News Corp or the Murdoch view is followed by
the editors of the newspapers that he owns.
Q1079 Lord Inglewood:
Are you saying then that it is impossible for what you might describe
as fair and impartial and accurate news to emerge from that stable?
Mr Wall: We are saying that we believe that
ownership is tantamount to control.
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