Branson shows off his quad-play

Virgin Media ready to battle U.K. pay TV king BSkyB

British entrepreneur Richard Branson will host a party tonight for about 2,000 of his closest friends to celebrate the launch of Virgin Media, the latest entrant in what is becoming an increasingly competitive U.K. market for broadband Internet, television and telephony services.

But behind the glamorous facade, Branson is gearing up for a bloody corporate challenge to the might of the U.K.'s pay television leader, British Sky Broadcasting — and the signs are that the gloves are already off.

The flamboyant showbiz launch — to be held at London's Cirque Hippodrome — will be in characteristic buccaneering Branson style, with organizers promising a host of celebrities and entertainment acts as befits the man who signed the Sex Pistols and Simple Minds to his Virgin Music label (now owned by EMI).

On Wednesday, Virgin Media offered a taster for the launch with the announcement that it had signed a $36 million deal with Uma Thurman to promote the new multimedia service, which marketing managing director James Kidd promised would be "the most exciting and the biggest Virgin-branded company in the world."

Branson is promising to offer the U.K.'s first "quad-play operator," offering bundled digital television, Internet, fixed and mobile telephony, following the £800 million ($1.6 billion) acquisition of his mobile telecoms business Virgin Mobile with struggling cable operator NTL in the summer.

He hopes to use the popularity of the Virgin brand to drive through a customer-friendly cable revolution that the cable sector's checkered history has thus far failed to deliver.

BSkyB has not been slow to grasp the importance of a broadband offering, and in January it launched its own triple-play service — dubbed See, Speak, Surf — to steal a march on its competitor.

The Virgin package has two advantages over BSkyB's current digital lineup: a two-way broadband pipe and the combination of mobile services.

So far, BSkyB CEO James Murdoch has maintained a studied nonchalance over the Virgin Media launch, citing Sky's customer service credentials and television dominance.

"I think there will be a huge amount of noise (about the launch) … but basically customers are pretty smart," Murdoch said last week, as the satcaster launched its second-quarter figures.

"When you look at what we are doing in the marketplace today … you can get (from us) a dramatically better-quality TV, broadband and telephony experience than you can from Virgin. We are very confident that the product we have is of better quality, in terms of TV and broadband, high-definition and telephony."

But there is concern behind the scenes. Sky's lowered profits, slowed growth and higher churn in what should have been a good quarter have made the satcaster look more vulnerable than at any time in its recent history.

And Virgin is not the only competitor it faces. At the start of the year, BT Vision launched offering a DVR service, on-demand television and movies and a freeview box offering 30 channels of free digital television. Freeview this week announced its most successful holiday to date, with more than 2 million new additions, while next year telecoms group Tiscali aims to launch a VOD, broadband Internet and phone service to 5 million homes across the U.K.

Branson is no stranger to corporate conflict. In fact it could be argued that he goes out of his way to create it. And though analysts doubt whether there is really an appetite for quad play, they recognize he has the kind of marketing appeal that consumers love.

"There are a number of values associated with the Virgin brand, which includes fun and being young at heart," said Ian Watt of research house Enders Analysis. "That's what they are looking to do (with the rebranding). That's becoming increasingly important because the market is so competitive."

During the past three decades, the celebrity business tycoon has at various times launched — and sometimes sold — Virgin-branded businesses as disparate as music labels, airlines, train services, cosmetics, cinema chains, music retail outlets and soft drinks.

Whether Branson can become a digital media mogul is yet to be proved. But one thing is certain: He will relish the challenge.
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