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
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