End of Unit Assignment
Semester 2; 2007
The Question:
a) An Immediate consequence of the dispute between BSkyB and Virgin Media (VM) is that VM customers have lost access to four Sky TV channels. Explain in detail the effect this may have on the demand for VM services. What measures could VM use to mitigate the consequences of this change?
b) Following the Development of IPTV (delivery of TV programmes over Broadband internet) and the increasing importance of TV services delivered in “non-traditional” ways (by cable or over the internet) BSkyB appears to be losing its monopoly power. Discuss the evolution in this market and identify the likely benefits this may bring to consumers
Question (a)
Virgin Media customers which are 3.3million will be denied access and view to some of the Sky’s channels that, so far, they could freely watch as part of the package they acquired. This was caused by the dispute arose by both companies which did not find an agreement when it came to renew the contract. In fact Virgin Media claimed that Sky had doubled the prices of its basic channels compared to the last contract all because they “are trying to coerce Virgin customers into switching providers by denying access to basic channels.” On the other hand, Sky says that the dispute has come about merely because Virgin Media has refused to pay the price that was asked and denies the allegations by Virgin which claims that the prices were not only increased but doubled.
The immediate effect of this dispute was the loss by Virgin of four Sky channels: Sky One, Sky Travel, Sky News and Sky Sports News. This would hit negatively the demand for Virgin Media’s channels mainly for two reasons: the first is that Virgin will not decrease its fee prices “Virgin Media says it has no plans to cut its prices to compensate for the loss of the channels saying it still offers a good value, and citing around 2700 hours of on-demand viewing” . The second reason why the demand...