Media: All about ... Living TV Group

Is Sky's acquisition of the former VMTV a wise move?

There have, over the years, been those who have argued that Virgin Media has not exactly over-achieved when it comes to its homegrown TV channels. We're not talking about UKTV, a joint venture with BBC Worldwide, here, of course - though Virgin Media has, over the years, found it convenient now and again to blur the distinctions between the two sides of its content business.

No - we're talking about the likes of Living, Bravo and Virgin1, the Virgin Media Television assets that Virgin Media has, according to industry gossip, been trying to ditch for years and which have finally been sold to BSkyB.

A deal, around 12 months in the making and initially announced last month, was actually completed last week. Or sort of completed - BSkyB still hasn't assumed full management control. Although it has paid an upfront £105 million for VMTV and has announced that the division will be rebranded as Living TV Group.

But it has effectively been warehoused - able to continue as before under existing internal management - until full regulatory clearance is obtained from the Office of Fair Trading. If that clearance is given, BSkyB will pay another £55 million to Virgin Media and the operation will be fully integrated into the Sky business; if it isn't, the assets, jointly or severally, will be sold on.

It is unlikely that the deal will be blocked because the most serious competition concerns would be ones affecting Virgin Media - and it's the seller. But still, according to some observers in the media industry, the OFT can't be trusted to tie its own shoelaces with any great urgency, so it's unwise to forecast a timescale here.

Meanwhile, all that Sky has done is to announce that VMTV is to be renamed Living TV Group and to reveal that it is not renewing the contract with Richard Branson's Virgin Enterprises allowing Virgin1 to be so called. A new branding will be unveiled in August.

When Virgin1 was launched back in October 2007, the hype was that, in terms of opportunities for homegrown original UK programme production, this was the most important TV debut since ... well, probably since the launch of Channel 4. It hasn't quite worked out that way - unless you number Naked Office in your list of all-time greats.

Similarly, Living's brand profile has always been slightly at odds with its premium positioning near the top of the Sky EPG. Recently, VMTV has supported its brands with a perhaps surprising amount of marketing given that it was up for sale. Last year, it appointed The Brooklyn Brothers as its ad agency and has also used Karmarama to create a recent campaign featuring Elle Macpherson to promote Living's new season of Britain's Next Top Model - one of the channel's most talked-about shows. That said, it's worth assuming that Sky, when it does acquire full control, will lavish more love - even if it is tough love - on these assets than they have heretofore received.

1. The VMTV (now Living TV Group) channels are: Living, Livingit, Bravo, Bravo 2, Challenge and Challenge Jackpot, all of which are subscription channels; and Virgin1, which is a Freeview channel. In pay-TV homes, Living is ranked 12th in terms of its all-adult share of viewing; Virgin1 is 26th and Bravo 30th. They obviously do better in the rankings against their target demographics. Virgin1 and Bravo are 19th and 25th respectively against pay-TV men, 16-44. Living is ninth against pay-TV women, 16-44. Virgin1 is ranked 15th against all Freeview adults.

2. Living TV Group's inventory, which is currently represented by Virgin Media's digital and television airtime sales house, ids, will be sold by Sky Media. In the expectation of this deal maturing and following the revelation at the start of July that it is to lose its UKTV business to Channel 4, ids had already announced that it was to close. The ids operation, which has 100 staff led by the managing director, James Wildman, will shut up shop at the end of the year. It's not yet clear how many ids staff will make the transition over to the Sky Media team.

3. One of the factors prolonging the VMTV talks was the issue of carriage agreements - an area of dispute between the two parties in the past. There's now effectively a mirror image of the former arrangements. Sky clearly will no longer have to pay Virgin the £40 million it pays currently for the privilege of carrying the Living TV Group channels. And, as part of the deal, Virgin Media has struck a nine-year carriage deal for all of Sky's basic subscription channels and an option on their HD variants.

WHAT IT MEANS FOR ...

LIVING TV GROUP

- Its main channel assets can now expect to be marketed more aggressively and (if this is not a paradox) sympathetically. Some observers say that the channels seemed to acquire a new lease of life (and more coherent promotion) once they had effectively been put on the block last year. This only serves to illustrate the potential here.

- Over the past decade, Sky has successfully evolved from a filmsand football-led proposition into a television platform fit for the whole family. Sky's monthly customer survey, which embraces 30,000 homes, includes a question about which channels are deemed to provide greatest perceived value from a Sky subscription. Historically, Living has ranked the fifth most-valued channel.

VIRGIN MEDIA

- Effectively, this could signal the end of its aspirations to be a creative company. This may make future digital media opportunities all the harder to harness.

ADVERTISERS

- Sky Media had already strengthened its market leverage with the win, at the end of last year, of Viacom's airtime sales portfolio. This merely adds to that momentum - giving Sky Media around a 20 per cent share of TV advertising, and the Living inventory is particularly welcome as it helps to counteract the male audience bias of Sky Media's existing portfolio.

- There's another interesting piece of trivia here. The deal returns Living to the tender loving care of the Sky Media managing director, Nick Milligan - when it launched in 1993, it was sold by Milligan's UK Gold team.

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