Media Forum: Is Sky/Virgin pact positive?

Should advertisers welcome Sky's return to Virgin, Alasdair Reid asks.

A new era dawns. History in the making; peace in our time. How very sweet it is to be alive at this juncture, to have witnessed this. The unthinkable, the improbable, the almost miraculous has happened: and to know this - know and understand and feel it truly - is to be filled with awe and joy.

Yes - Virgin and Sky have buried the hatchet. Not in each other. Just buried it. Sky's basic tier channels, which were pulled from Virgin Media's cable households in March last year following a dispute over carriage fees, will now return.

Virgin Media has agreed to pay up to £38 million a year - and, as of 13 November, cable customers will once again be able to sample the delights of Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts 1, Sky Arts 2, Sky Real Lives and Sky Real Lives 2.

Sky's original reckoning (some analysts say) when this first came to a head, was that fans of these channels (particularly Sky1, traditionally near the top of the ratings in the digital-only universe) would migrate to satellite, thus weakening a cable platform that, down the years, has been anything but financially stable or strategically assured.

Unfortunately, it didn't quite turn out that way - and the biggest loser in all of this, arguably, has been Sky1. It lost ratings and that translated directly into lost ad revenues and a weakening of Sky Media's overall trading position.

So, from a negotiation season point of view, this new deal is a timely development - and Sky will certainly be inclined to take a more robust line as deals for 2009 are finalised in the run-up to Christmas.

Is all of this good news for advertisers? Last week, some agencies and their clients were speculating idly that there were slightly inconvenient aspects to this. It's perhaps not in their interests for Sky Media to acquire a new-found militancy at this stage in proceedings, they explained. Sky1's position may improve in raw numbers terms, they added, but, in demographic terms, it might not be the sort of audience you'd be prepared to pay any sort of premium for.

But that's not the way David Walker, the marketing operations controller at Kellogg, sees things. He says we should look at this in straightforward terms - a potential increase in commercial audience should be welcomed by advertisers. "We're delighted," he says. "It's good for us and it's good for Sky."

However, John Davidson, the group TV trading director at Starcom MediaVest Group, isn't so sure it's that simple. He comments: "Understandably, Sky will be beating its drum loudly about its basic channels' return to the Virgin platform, but the news will not divert agency attention from overall Sky portfolio performance and comparative premium costs in the multichannel market. Perhaps the real story is a closer high-level working relationship between Virgin and Sky. But if they tried to merge their sales operations, that would not be welcomed by agencies and rival sales houses."

Meanwhile, from a consumer point of view, it might prove easier for Sky to lose the Virgin audience than to get it back again, Tony Regan, the head of planning at Initiative, says. He explains: "With something like Sky Sports News, for which there has been no adequate substitute on Virgin, then you'll find a surge of people returning. But if you'd wandered away on to BBC News 24 when you could no longer get Sky News, then you might have formed a new habit that will be difficult to change."

On the other hand, John Overend, the joint managing director of OPera, says there will inevitably, at some stage, be an improvement in Sky audiences - and increases in commercial audience are surely good news for advertisers. He adds: "I can't see any downside here. I can't see any difficulties in the trading situation, for instance. Agencies and media owners have to manage rises and falls in audiences all the time - and, in any case, I don't think the implications will work their way through completely before (negotiations regarding) 2010."

YES - David Walker, marketing controller, Kellogg

"It's good for Sky and it's good for advertisers because it provides the opportunity for Sky channels to get far more exposure. I think advertisers targeting a broad demographic will welcome this."

MAYBE - John Davidson, TV trading director, Starcom MediaVest Group

"Some agencies would have preferred the return to have occurred next year rather than just before the TV negotiation season. This will put even more pressure on weaker-performing TV sales houses."

MAYBE - Tony Regan, head of planning, Initiative

"If you've lost the Lost habit, are you going to get it back? People tend to have a relatively small number of programmes in their repertoire. So it will be interesting to see what Sky does in marketing terms."

YES - John Overend, joint managing director, OPera

"I can't see any way in which this isn't good news for advertisers. It will, for instance, put a renewed focus on Sky1 as a product - so more time and money will probably be spent on the schedule, which will be a great benefit to everybody."

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