Branson versus Murdoch

Above all, its silly. The Virgin Media/BSkyB war of words has spiralled down to a playground spat worthy of Bart Simpson. Old Sky Snooze nose-thumbs one side; Loser screeches the other.

Above all, it’s silly. The Virgin Media/BSkyB war of words has spiralled down to a playground spat worthy of Bart Simpson. ‘Old Sky Snooze’ nose-thumbs one side; ‘Loser’ screeches the other.

But behind the childish language lies a very adult purpose; a deadly duel whose result will only be known in the medium term.

Virgin Media can indeed be called a loser if we look at immediate results. Not only has it lost carriage of all basic Sky packages, which include such programmes as the Simpsons, Lost and 24. It must also stare down a maiden set of fourth-quarter numbers that analysts consider to be fairly appalling.

Of course, exceptional rebranding and restructuring costs were always going to distort the picture. But what jars particularly are the 37,000 net customer losses in Q4. This was mainly owing to Virgin Media failing to replace, or replace fast enough, flagging fixed line telephony trade with its broadband offer, which is being undercut by the likes of Carphone Warehouse.

Equally uninspiring was the insight the figures offered into Virgin Media’s powers of negotiation. Somehow or other, Sky managed late last year to chisel the carriage cost of Virgin Media’s Living, Bravo and Trouble channels on its satellite platform down from £35m to only £5m.

What was that proposition again?

These grim figures raise some interesting preliminary questions about what, exactly, the Virgin Media proposition amounts to. On present showing, it’s neither fish nor fowl, neither value- nor service-led. With the quagmire of a three-way merger to deal with, not to mention the cable industry’s far from edifying reputation, the ‘customer experience’ is unlikely to radically improve any time soon. Added value? Four-play is still at the rhetoric stage; and, if competitive pricing is what it’s all about, rivals are having a ball.

So far, so bad. But Sir Richard Branson, principal shareholder of Virgin Media, has one enormously powerful card to play and, if he plays it well, it should trump all his difficulties over time. It is – himself. People in this country admire Sir Richard, who plays the populist champion to a tee (or an inch of his life, to judge by some of his escapades). They don’t much like, and certainly don’t trust, Rupert Murdoch, the ‘Svengali’ of media.

This puts the government of the day in an unpleasant dilemma. Fearing the displeasure of Murdoch, it must also respect the popularity of Branson. What happens when the two come into conflict may be seen in the studiously evasive terms of the recently announced investigation into BSkyB’s 17.9% stake in ITV.

Hostages to fortune

It will be remembered that the opening shot in the Murdoch/Branson media war was James Murdoch’s audacious share raid, which brought Branson’s ambitious takeover bid for ITV to a juddering halt. At the time, it looked a master-stroke: in one fell swoop thwarting a competitor and laying claim to some of the best content in British broadcasting.

Now we’re not so sure, and the reason we’re not sure is that Branson has played a weak card (regulatory review) very well.

He’s got a crowbar into the door and he will be levering it for all it’s worth.

At the moment it’s ‘only’ an Ofcom review that may, or may not, result in a public interest inquiry. Murdoch must be hoping that, in a few months’ time, a perfunctory inquiry will result in the public interest issue being quietly dropped. And, indeed, the last thing incoming premier Gordon Brown will need is a spectacular bust-up with the man who can make or break his election prospects.

But that doesn’t mean it won’t happen. The so-called Murdoch clause in the 2003 Communications Act is a bomb waiting to go off and Murdoch’s ITV stake has primed the powder. A stranglehold over news provision (ITN); over sport (what happens, for example, when the next TV auction over Premiership rights comes up?); and the potential manipulation of general content carriage (which could make the present spat look tame): these are just some of the hostages to fortune.

Many an MP would be glad to press the detonator. And a man with Branson’s determination, popularity and propaganda skills is just the one to hand it to them. Unwinding the ITV stake would be an unthinkable humiliation for Murdoch. Unthinkable, but not impossible.

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