Virgin Media moves towards the content-aggregator model, but needs to do more

Virgin Media has unveiled a new offer to stem the flow of TV customers to the exit, teasing them with a free upgrade to a 4K-ready V6 TV box.

This is a move which should not come as a huge surprise, as Virgin Media is still to fully cement its place in the world of content. The initial foray was less than successful, though the introduction of the all-singing, all-dancing V6 box last year was a very positive move. This move does seem to indicate VM is wary about the original content idea, but is backing the role of aggregator.

The new deal will offer existing customers a free upgrade to a 4K-ready V6 TV box, though VM claims one in four already have one installed. Those who do have the latest box tend to watch two hours additional content every week, suggesting the interface is improved. From personal experience, your correspondent can confirm VM was not a great experience when it came to TV, it was okay but nothing exceptional.

VM now finds itself asking the same question as a lot of telcos staring at the world of content; where do we fit in? Those who have tried to crack the content ownership so far have largely failed, though looking across to Continental Europe, Deutsche Telekom has shown there is value in the role of content aggregator. VM does seem to be heading down that direction, and we think it is a very sensible idea.

“Virgin Media has the opportunity to leverage its superfast broadband assets to deliver a good content experience for the consumer,” said Paolo Pescatore of CCS Insight.

“There are more than a hundred streaming services in the US who will be looking for a way to engage European audiences before too long. Being the aggregator, or a shop-window, is a very sensible idea, but Virgin Media needs to do more.”

Being a content aggregator is a very logical move for a telco. It has an existing relationship with the consumer, offers connectivity at home and on the move and is a lower-risk entry to the world of content. Virgin Media has shown it can do it with a partnership with Netflix, but it will need to develop more of these relationships if it is going to be a heavyweight.

That said, last year’s introduction of the V6 box, the partnership with Netflix and other exclusive box set deals, does seem to have made an impact on subscriber numbers. Over the last four quarters, the total number of TV subscribers has risen; 4,033,900 (Q4 2016), 4,073,200 (Q1 2017), 4,106,300 (Q2 2017) and 4,119,600 (Q3 2017). The trend is heading the right direction.

That said, content is a tricky game to play in as there are so many options. Trying to pick the next Breaking Bad or Game of Thrones could be considered pot luck, but the OTTs are doing it too often for this to be considered a coincidence.

“The telcos don’t have the same luxury as the OTTs,” said Pescatore. “Netflix has been in this world for quite a while and has the data available to understand what customers want. This insight makes buying decisions for content much easier and removes a notable amount of risk.

“The telcos will get there eventually, but they need the data first. Being an aggregator allows them to collect this data without taking the risk of spending on content.

“Most consumers also have two or three streaming services, meaning finding content can be a nightmare, there are so many windows and search engines. Having a smooth interface where all content is collected for the consumer provides a solution to a problem which is out there right now.”

It can be frustrating having to sign into a different browser and beginning the search process over again. DT’s Stream On shows that if you can develop relationships and bring all the content into one place, you are providing a valued service to the consumer. It is a logical place for the telcos to begin their content journey; consumers generally only have one connectivity provider, so take advantage of that streamlined view and bring all the content into one app.

The aggregator route is certainly a sensible one for VM to take, as while it is a sensible place to enter the value chain, it will also provide insight for any original content decisions which could be made down the road. It is also low-risk, something all the unadventurous telcos like to hear.

This is a good move from VM, but it can’t rely solely on a partnership with Netflix and the bog-standard UK TV channels; it needs to do more to bring in exciting content partners.