February 6, 2008 | posted by Michael Baxter in New Media |

When the idea of ITV and Virgin Media merging was first mooted, the media slated it. One commentator likened the move to two drunks, trying to prop each other up.

But then again, BSkyB seemed much more alarmed by the idea, prompting it to buy a sufficiently large stake in ITV to block the merger.

Then Sir Richard climbed on to his high horse, and the authorities pondered, deliberated, and finally decided the Murdoch-dominated TV company has too much influence over ITV, and must sell some of its stake.

So now the way is clear for Virgin Media to leap back in, and buy the UK’s most popular TV station.

Yet all of a sudden, it all seems so different.

Virgin Media’s acting chief executive Neil Berkett said yesterday, “The bid for ITV was a moment in time, which was a view of the apparent value of the asset, a view of what Virgin Media could do with that asset and a view of potentially monetizing some of our tax position…. The market is completely different today to what it was then, and for us to reconsider anything in the acquisition of a production, an ITV look-alike, we would have to view it on its merits.”

But then also yesterday, BSkyB has just revealed a loss for the first half of its year, after writing-down the value of its stake in ITV.

Maybe it was all a cunning plan hatched by Virgin Media. They were able to talk tough, trick BSkyB into buying shares that were bound to lose value, score lots of brownie points over BSkyB with the authorities and customers, and then to boot, see their rival make a big financial loss out of the whole venture.

The truth, though, is that the whole sorry saga has been a disaster.

Now Virgin Media is admitting that it can’t compete with BSkyB for premium-priced television, and at the same time seems to be quietly dropping its idea for four-play media.

You may recall, four-play: broadband, TV, fixed and mobile telephony. The idea was simple enough. People would soon be watching their TV on mobile phones and via broadband, so by combining all offerings under one roof, the company would become a mighty player indeed. In fact, the whole idea behind NTL merging with Virgin’s mobile phone outfit was to be able to offer this four-play service.

But it seems the move has, instead, become a mighty failure.

Yesterday, Neil Berkett also said the company will put less focus on what it is now calling “quad play.” And yet, despite a horrendous line-up of disasters, Virgin Media still has one major thing going for it. With 3.3 million cable televisions, the company can storm ahead in the new burgeoning industry of Video on Demand (VOD).

And here, Mr Berkett was more bullish. “Usage of VOD content has more than doubled in the last 12 months, and users have really fallen in love with the product,” he said.

He added, “There is no economic advantage for us in premium television, where there is a very strong competitor. There is no profit pool in premium TV,” he said. “We believe we have a superior product in midrange television, so let’s focus on that. That is where the profit is going to come from.”