Virgin to do deal with Warner?

UK cableco Virgin Media is rumoured to be talking over a content deal with Warner Bros.

The agreement would see Virgin Media get a first look at Warner Bros content with obligations to pick up at least one of its shows each year.

Last month, Virgin revealed that it lost 46,900 customers in the first three months of the year following its well publicised fallout with BSkyB and the subsequent loss of the basic Sky channels.

The news of a potential deal with Warner has prompted industry analysts to comment that while it is a step in the right direction, the situation at Virgin is likely to get worse before it gets better.

Brendan Logan, chief executive officer at telecoms consultancy Logan Orviss, said, “The situation at Virgin Media is very likely to get worse before it gets better, given that customers responding to the recent well publicised spat with Sky on 30 day termination won’t appear in the churn metrics until next quarter.”

However, Logan said, “The true situation is far from bleak. Virgin has to bite the bullet and pay the ‘integration tax’ as it starts to bring the customer and data management systems into line across the group, as it gears up to leverage the potential benefits of quad-play capability in its service offerings.”

So for the meantime, Virgin has to take a hit as it educates consumers about multi-play but doesn’t yet have the required “cross-platform” services to make the bundled offerings properly sticky. “The lead time advantage they get from starting this process now may well turn out to be a significant competitive advantage, but not just yet,” Logan said.