Kate Bulkley, Media Analyst.

Virgin relies on boxing clever

By Kate Bulkley

Royal Television Society

July/Augustl 2010

Cindy Rose

What will TV look like tomorrow? That is what Cindy Rose spends a good deal of her time asking herself. But the executive director of digital entertainment for Virgin Media is not considering the distant future. This is near-term, almost-upon-us stuff that will come not a minute too soon for the cable company that is locked in head-to-head competition with one of the most aggressive pay-TV operators in the world, BSkyB.

Since joining Virgin Media seven months ago from Disney, where she ran the studio’s interactive media group, Rose has been plotting the re-invigoration of Virgin Media as a leading entertainment brand. “I think that last year was the year of broadband for Virgin Media,” says Rose. “This is the year of TV.”

Although it might seem counter-intuitive, the Ł160m deal to sell Virgin Media Television to BSkyB in June has helped Rose take a step or two closer to her vision. “It is almost anachronistic to think you have to own the content to be the market leader in the digital entertainment space,” Rose contends.

With the sale, Virgin Media will add Sky’s HD channels to the roster of TV channels it offers its nearly 4 million subscribers. “It’s been a big priority of mine to improve the HD line-up,” she says. “In the past six months we have gone from seven to 14 HD channels, and with the Sky deal it will double again… there is a perception in the marketplace that our TV product is inferior to Sky’s and part of addressing that perception is getting Sky HD premium channels.

“With this deal we also get on-demand, red button and some online rights as well.”

Exactly what on-demand Sky rights she will get remains to be hammered out, but Rose believes that giving viewers options is key to keeping them as subscribers: “What people consider entertainment is changing. It’s not just about the movies, sports, entertainment and music. It’s also about gaming and IM-ing and Tweeting and many other applications.”

She pauses to take a breath and smiles. “So we had to step back and ask: do we want to be leading in this space or will we be left behind? Clearly, we don’t want to be left behind.”

The key element in Rose’s ambition to re-invent VM’s “TV proposition” is something that makes her leap out of the chair in her glass-walled office on London’s Great Portland Street. She picks up the remote control for the big TV screen by her desk and insists: “You have to see this.”

Rose shows me the test version of the new set-top box being developed for Virgin Media by Tivo, the ground-breaking US-based digital video recorder manufacturer.

This successor to the current V+ HD box will combine traditional linear TV channels with broadband-delivered, on-demand TV – all of which will be searchable.

The new STBs will be offered to customers before the end of the year and will give them access to certain internet sites such as YouTube, and there will be an Amazon-like recommendation engine that tracks what users like and offers other content they might not have thought of watching.

No doubt the stable of websites will grow, but the box will not be a portal to the whole world wide web by any means.

Up to eight personal profiles will be available (although this facility might not be enabled until early next year) so the box won’t recommend kids’ shows to Dad nor action movies (or worse) to his young daughter. In addition, Rose plans to add a social component to the Tivo boxes, so users can Tweet and IM and generally connect with other people while they are watching the TV.

Rose uses her six-year-old son as an admittedly unscientific research group: “When he is looking for something he Googles, so I think that this generation of people will not be satisfied with the traditional linear-TV viewing experience. We see that clearly.”

According to Nigel Walley, managing director of media consultancy Decipher, Virgin’s Tivo box should help improve the cable operator’s position in the market. “Virgin Media has had a functionally better VoD offer than Sky for a while – but Sky does much better brand and product marketing,” he says. “This new box will be the beginning of the social-media revolution on TV in the UK, and in that Virgin will be well ahead of Sky.”

Of course, Virgin is not the only company looking to combine the internet and linear-TV viewing. VM’s current on-demand service allows – as does BT Vision’s – access to the BBC iPlayer on the TV screen, for example.

And internet competitors have no intention of leaving TV to its traditional players. The search behemoth Google will offer a TV aggregation service called Google TV in the US from this autumn. Coming in from the opposite direction, Sky Anytime+ will soon bring at least some of the internet to subscribers’ screens.

“Sky Anytime+ does not have the personalisation functionality that Tivo has,” claims Rose. “Every new market entry to the connected TV space forces us to raise our game. Sky Anytime+ is just one of them.”

The other big potential entrant to the connected TV space is Canvas (see article on page 6). While Rose says she “strongly endorses” the “ideals and objectives” of Canvas, she believes its ideal of creating an open environment for on-demand content services is not being adhered to in practice.

“We would really like to be able to operate Canvas alongside our own customer experience but this is not allowed under the Canvas trademark terms,” says Rose. “I don’t think this is a question of technical feasibility. I think it’s a question of commercial aspirations on the part of the Canvas partners.”

Although VM’s Tivo-powered set-top boxes should be on sale in time for Christmas, Rose and her 100-strong team are working flat-out to get another big gun in VM’s digital entertainment arsenal in place before then. The company plans to launch VPlayer by the autumn. This new rival to the BBC iPlayer and Sky Player will allow viewers access to on-demand programmes on their PCs and mobile devices.

Rose clearly sees the VPlayer working closely with the new set-top boxes. “The Tivo box will have a client (software) that you can download to your mobile or your laptop and then take stuff from the set-top box’s hard drive and move it to the laptop or the mobile so you can watch it on the go,” she explains.

Taking a leaf out of Sky’s playbook, the VPlayer technology will also let subscribers use their mobiles or PCs to remotely record programmes on their Tivo box for later viewing.

On-demand viewing is growing fast at Virgin, with over 204 million programme views in the first three months of this year versus 165 million in the same period last year. Some 2.1 million VM households – 58% of its digital TV subscribers – regularly watch on-demand content. “Virgin Media had 800 million VoD views in 2009 and, according to Barb, that makes us the third-biggest channel in the UK after BBC1 and ITV1,” says Rose with some satisfaction. VoD on Tivo will add another revenue stream by early 2011.

Rose’s big ambition – to make Virgin Media the “digital entertainment provider of choice” – means she must keep up with, and try to exceed, what Sky is rolling out. So, for example, she plans to have an on-demand 3D service by the end of this year.

However, there are questions about just how attractive the whizzy Tivo facilities will be to Virgin subscribers. “Tivo has really interesting functionality but one of the challenges is that the market for Tivo in the US is young urban professionals who are early adopters and don’t watch a lot of linear TV,” says Walley at Decipher. “The Virgin market is not like that. Virgin homes are a lot about family viewing.”

Rose, however, is convinced that the Tivo-powered boxes and the VPlayer are just the tonics that Virgin needs to overcome its perceived lag behind Sky. “We’ve got hundreds of channels and 7,500 hours of on-demand content today and we are about to wrap it up into a world-class user experience,” says Rose. “That is going to really change the face of TV in the UK.”

[Cindy Rose is executive director of digital entertainment at Virgin Media.]

 

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