ITV ready to pull plug on Vir­gin Me­dia over £80m bill

3.8m view­ers face los­ing cov­er­age of the flag­ship chan­nel as broad­caster and op­er­a­tor lock horns

The Sunday Telegraph - Money & Business - - Front page - By Christopher Wil­liams

ITV IS threat­en­ing a black­out of its flag­ship chan­nel in mil­lions of homes un­less ca­ble op­er­a­tor Vir­gin Me­dia hands over up to £80m a year, in a piv­otal con­fronta­tion over di­vid­ing the spoils of the Bri­tish tele­vi­sion in­dus­try.

The pair have been locked in tense dis­cus­sions since ITV is­sued Vir­gin Me­dia with the de­mand over the sum­mer. The broad­caster threat­ened to shut down the feed of its main chan­nel to 3.8 mil­lion ca­ble tele­vi­sion homes last month.

At the 11th hour ITV agreed to delay the de­ci­sion un­til early next year, putting it top of the agenda for Dame Carolyn Mccall, the in­com­ing chief ex­ec­u­tive.

She is due to start work in early Jan­uary. Dame Carolyn will walk into a stand-off be­tween ITV and its big­gest share­holder, Lib­erty Global, which also owns Vir­gin Me­dia.

The ca­ble op­er­a­tor warned this week­end: “Nei­ther Vir­gin Me­dia nor our cus­tomers will be pay­ing for chan­nels that are meant to be free.”

Ac­cord­ing to con­fi­den­tial fig­ures seen by The Sun­day Tele­graph, ITV is de­mand­ing a min­i­mum an­nual pay­ment of around £45m for a ba­sic feed of its main chan­nel. That to­tal re­flects a charge for each cus­tomer, in­clud­ing a higher tier for those on Vir­gin Me­dia’s pricier monthly pack­ages.

The bill rises to £80m af­ter ITV adds charges for the abil­ity to record pro­grammes, high def­i­ni­tion pic­tures and its “plus one” broad­cast of the main chan­nel an hour later. Vir­gin Me­dia is fiercely re­sist­ing ITV’S de­mands for the pay­ments, known as re­trans­mis­sion fees. It will­ingly pays to carry the broad­caster’s other chan­nels, but has ar­gued that the flag­ship must re­main free of charge.

Un­der its pub­lic ser­vice li­cence, ITV ac­cepts obli­ga­tions to fund re­gional news and other rel­a­tively ex­pen­sive but low-rat­ing pro­gram­ming in re­turn for a guar­an­teed num­ber three slot in chan­nel menus. The deal helps de­liver large au­di­ences in a crowded mar­ket that sup­port ITV’S ad­ver­tis­ing busi­ness.

ITV has been push­ing for the right to charge pay-tv op­er­a­tors for its main chan­nel for years, claiming the cur­rent ar­range­ments are “ef­fec­tively a grow­ing multi-mil­lion pound an­nual sub­sidy”. It ar­gues pay-tv op­er­a­tors make money from its in­vest­ments in pro­gram­ming and un­der­mine ad­ver­tis­ing rev­enues with set-top boxes that al­low view­ers to record pro­grammes and fast-for­ward the breaks.

The broad­caster made a break­through in the sum­mer when the Govern­ment re­pealed a copy­right ex­emp­tion that guar­an­teed ca­ble op­er­a­tors free ac­cess to the main chan­nels.

Vir­gin Me­dia has sought sup­port from pay-tv ri­vals BT and Sky in its bat­tle with ITV. They do not face a bill for re­trans­mis­sion fees, but op­pose moves to charge for pub­lic ser­vice tele­vi­sion.

The Govern­ment’s view of the is­sue ap­pears to have shifted. Min­is­ters have said re­trans­mis­sion fees are a mat­ter

for com­mer­cial ne­go­ti­a­tion. How­ever, in a let­ter last month Karen Bradley, the Cul­ture Sec­re­tary, wrote to the chief ex­ec­u­tives of Vir­gin Me­dia, BT and Sky UK say­ing there should be no net pay­ment from pay-tv op­er­a­tors to broad­cast­ers for pub­lic ser­vice chan­nels.

Ac­cord­ing to sources close to the row be­tween Vir­gin Me­dia and ITV, the ca­ble op­er­a­tor has been ex­plor­ing op­tions to pro­vide ITV’S main chan­nel if the of­fi­cial feed is shut down. It could take the un­en­crypted sig­nal from the Sky satel­lite and re­trans­mit the chan­nel over its ca­ble net­work to cir­cum­vent a black­out, for in­stance.

Such a move could put Vir­gin Me­dia in tech­ni­cal breach of copy­right law. It would then hope ITV would be found by Of­com to be in breach of its pub­lic ser­vice obli­ga­tions, which in­clude a “must of­fer” pro­vi­sion. The broad­caster is likely to claim the rule is sub­ject to agree­ment of terms, how- ever, po­ten­tially in­clud­ing a price.

A spokesman for ITV said: “Our po­si­tion is very straight­for­ward – ITV, and other pub­lic ser­vice broad­cast­ers, should be paid fairly by pay-tv plat­forms that make money from our multi-bil­lion pound in­vest­ment in orig­i­nal UK con­tent so that we can con­tinue to in­vest in the pro­grammes, par­tic­u­larly drama and en­ter­tain­ment, that our view­ers en­joy.”

Vir­gin Me­dia said the Govern­ment had been “clear and con­sis­tent” that no fees are due.

A spokesman said: “ITV signed up to a new 10-year li­cence in 2015 that didn’t in­clude these fees – it’s now try­ing to go back on this deal to prop up its prof­its. ITV is al­ready fully com­pen­sated for this through its prom­i­nent po­si­tion, with the au­di­ence reach and ad­di­tional ad­ver­tis­ing rev­enue this de­liv­ers.”

Bap­tism of fire: Dame Carolyn Mccall’s first role as ITV chief ex­ec­u­tive will be to set­tle the row with Vir­gin Me­dia

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