Take the money and run 

29 May 2009 tbs.pm/1061

BSkyB tables £160m bid for Virgin Media channels, reports say

Whilst many broadcasters are still bitterly complaining about an advertising downturn (ITV’s short term Britain’s Got Talent/football windfall notwithstanding), BSkyB still seems oblivious to the financial storm that currently surrounds it, although of course it’s conducting business from the relative shelter of a large number of pay-TV subscriptions.

Therefore it’s no surprise that BSkyB is easily capable of effortlessly outbidding rivals for seven Virgin Media channels that it may want for its own purposes (strategic or otherwise), and any previous public disdain for the likes of Virgin 1 seems to be a typical BSkyB response to something that it views as a potential direct competitor or asset.

And paying a £30m+ premium for something is perhaps expected for a company who had bought ITV shares just to prevent an easy Virgin Media takeover, but it’s also likely that BSkyB considers these channels when combined with the rest of the Sky premium channels to be of much greater value in total than their constituent parts.

Therefore purely from a strategic viewpoint these channels would be of much greater value to BSkyB than they would be to anyone else, hence the high bid for the seven channels. And if Virgin Media refuses to licence the Virgin brand to BSkyB, Sky can always rechristen Virgin 1 as Sky 4 (or FX 2?), losing nothing in the process.

So what should Virgin Media do? My advice is to call their bluff and accept the offer, because if BSkyB are subsequently investigated for anti-competitive behaviour as a result it’s likely that they could be forced to sell on the channels again for a loss. (Just like what may inevitably happen with their ITV shareholding.)

A Transdiffusion Presentation

Report an error

Author

David Hastings Contact More by me