Sky faces £25m ad revenue shortfall

LONDON - Sky is holding emergency talks with agencies in a desperate bid to avoid disputes over ad deals, following the collapse of its carriage agreement with Virgin Media last month.

Sky Media's managing director, Nick Milligan, and his deputy, Paul Curtis, have met with agencies to ask for their co-operation in adopting a "wait and see approach" for compensation.

Most agencies have said they will extend goodwill to Sky until the end of the financial year. But they will expect changes in rates after that if Sky's audiences drop by the predicted 11 per cent after its "basic" channel package, which includes Sky One and Sky News, was dropped from Virgin Media homes.

Chris Locke, the UK group trading director at Starcom, said: "From July, we will be telling Sky that we are not paying for less if the impacts are down. I think they could lose about £25 million in ad revenue this year and, going forward, they won't grow their share, so it could go backwards. It's potentially quite damaging, as Sky is entering into its own CRR (Contract Rights Renewal) model."

However, one agency broadcast director said the market had confidence in Sky, and believed a deal "of some sort" would be reached with Virgin Media in the next few weeks.

A Sky spokesman said Sky would "ensure ongoing dialogue with all agencies and advertisers to offer the brand support they need".

The regulator Ofcom has this week been asked to investigate the ongoing dispute by its Consumer Panel, which claims consumers are being disadvantaged.

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