For Broadcast July 16, 2008

BBC Worldwide chief executive John Smith has given the strongest indication yet that the company wants to end its UKTV joint-venture with Virgin Media and find a new partner.

Smith told Broadcast he wants more influence in the joint-venture and to be "in bed" with a partner that will better enhance the UKTV family of channels.

He said: "We think that it would be better to be in partnership with somebody who actually improves the partnership, who brings something to the venture; somebody who brought more programmes or more channels or cross-promotion or something."

Smith said BBCW wanted UKTV to remain a partnership, rather than owning it outright, and said it would look for a replacement for Virgin Media if the cable business decided to sell its stake.

The prospect of Virgin Media exiting UKTV has increased with chief executive Neil Berkett focusing the company on being the best distribution platform in the UK, rather than growing its content businesses.

A sale of Virgin Media's channel assets has been mooted, possibly including both its wholly owned Virgin Media TV channels, which include Living and Virgin 1, and its stake in UKTV.

Virgin Media could raise as much as £800m for both assets, with the majority of the value coming from its 50% stake in UKTV, according to financial sources.

Virgin Media could not find an executive willing to speak about its plans for UKTV, but privately the company acknowledges that there has been tension in the joint-venture.

BBCW's Smith told Broadcast that he had already considered new measures that could be introduced with a new UKTV partner. He said he would allow UKTV chief executive David Abraham "more freedom to do things online" and would be willing to look at "the balance between free TV channels and pay-TV channels" in the portfolio.

The success of Dave proves the power of having a channel available both on pay-TV and Freeview. Dave's peaktime audiences have tripled since its relaunch last year and the channel is now the most profitable in the UKTV portfolio, contributing around £25m in ad sales revenue this year.

UKTV's nine channels reach a total of 33 million viewers a month with an estimated annual turnover of £200m. Profits are put at between £50m and £60m.