Market Insight

Virgin Media revamps TV service around V6 box, as Liberty Global commences wider hardware rollout

November 30, 2016

Ted Hall Ted Hall Director – Research and Analysis, Service Providers & Platforms

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UK cable operator Virgin Media has unveiled its new advanced TV platform, centred around the V6 set-top box and supported by several multiscreen apps, a new tablet device and an electronic sell-through (EST) service, Virgin Media Store.

Key features of the V6 box, which runs the TiVo user interface (UI) and has a 1TB hard drive, include the ability to record six channels simultaneously, more than on any other UK TV platform, while watching a seventh recording or video stream. It supports 4K ultra-high definition (UHD) services, which from launch will come via Netflix and YouTube, as well as high dynamic range (HDR) content, though this will require a software download that will be made available after launch.

An updated UI, which is also being rolled out on the current generation of Virgin Media TiVo boxes, includes a feature called SeriesLinkPlus (known as TiVo OnePass in the US), which collates content such as episodes of TV series in one place, drawing from linear and on-demand TV and customer recordings.

Virgin Media’s revamped TV service has a strong focus on multiscreen. The operator claims to offer access to more mobile-streamed live channels than any other operator, with 119 available via its Virgin TV Anywhere app. Furthermore, the updated app will enable users to access selected set-top box recordings on multiple platforms via streaming within the home, or through downloads to watch offline anywhere. Another feature allows users to resume viewing of programs where they left off on different devices, such as set-top boxes in other rooms or mobile devices. The operator is also launching a dedicated kids TV app.

To further encourage multiscreen viewing, Virgin Media launched a new Android tablet branded the TellyTablet. The device, which is designed with video streaming in mind, has a 14-inch screen, four built-in speakers and pre-loaded video apps.

The V6 box will be available to existing Virgin Media customers taking a mid-tier Mix bundle or above before the end of 2016, and to new customers from January 2017. The standard price for the box is a one-off charge of £99.95 ($126.30), or £49.95 for top-tier package subscribers, with no ongoing monthly service fees. The TellyTablet costs £299, with customers able to spread the cost over 24 months.

The V6 launch is part of a pan-operational initiative by Virgin Media’s parent company Liberty Global to roll out ‘next-generation’ set-top boxes to most of the markets in which it is active – mainly in Europe and some in Latin America. Referred to internally as Eos, the box will carry the Horizon brand outside the UK. The wider rollout is due to begin in 2017.

Our analysis

An upgrade of Virgin Media’s TV platform was certainly much-needed, with its existing TiVo-based service – launched in 2010 – showing its age, particularly following the unveiling of the impressive Sky Q platform by UK pay TV market leader Sky late last year. Telcos BT and TalkTalk are also in the process of upgrading their respective YouView-based platforms with new UIs and features.

Though V6 and the supporting apps and devices go some way to providing the kind of joined-up TV experience pay TV subscribers increasingly demand and expect, the new platform has some notable holes that Virgin Media will need to address as the product evolves.

One is the lack of 4K sports content, which is the main selling point of Sky and BT’s UHDTV offerings. This highlights one of the weaknesses of the traditional cable model, which eschews exclusive premium content acquisition in favour of a focus on technology and networks, and relies on third-party carriage deals.

Another service limitation of the platform is its restrictions on the watch-offline multiscreen feature, which is only possible for selected recorded content. Virgin Media has secured new rights deals with ITV, Comedy Central, Discovery, Disney Channel and Fox, but is missing key Hollywood studios. This means that users will not, for instance, be able to download all of the premium movies they record on their set-top box to mobile devices – something Sky Q customers can do.

In other areas, with the exceptions of the six simultaneous recordings capability and the high number of multiscreen channels, Virgin Media has largely caught up to the competition, rather than innovated: the ability to seamlessly switch viewing across devices mirrors Sky’s ‘Fluid Viewing’ functionality; dedicated kids TV apps are all already operated by Sky, Netflix and the BBC – not to mention direct-to-consumer offering DisneyLife; and EST is now commonplace in the UK TV market, with all of Virgin Media’s pay TV rivals running download-to-own services.

This is not to say that the V6-led Virgin Media TV service is uncompetitive. Where its advantage lies versus the benchmark-setting Sky Q offering is on price – the one-off upgrade fee of £49.95/£99.95 compares favourably to Sky Q’s additional monthly fee of around £12 a month plus installation fee, which ranges from £15 to £199. The high price tag of the TellyTablet, meanwhile, may make that a less appealing piece of kit, but customers will not have to invest in one of these to take advantage of V6’s multiscreen functionality, as they will likely use more common tablets and mobile devices instead.

The pricing of the V6 box leaves Virgin Media well-placed to upgrade customers to its most advanced TV service, which in turn gives the operator the best chance of increasing customer satisfaction and reducing churn. Attracting new customers in the saturated UK pay TV market is a tall order: TV household penetration of traditional pay TV services stands at just under 62%, according to IHS Markit data. While subscription video services in the UK are growing, this has primarily come from IPTV, Sky’s pay TV lite offering Now TV and SVoD leader Netflix – not cable. Indeed, Virgin Media has experienced a slight decline in its TV subscriber base – which stands at 3.7 million – in recent years, making customer retention all the more important.

Outside of the UK, the Eos box’s place in the competitive landscape will vary. In many cases, it will provide a benchmark for rival operators in Liberty Global markets to aspire to, as the current-generation Horizon platform has. After all, there are not many Sky Qs out there setting the pace in premium pay TV technology. With V6/Eos set to quickly become Liberty Global’s primary set-top box, IHS Markit forecasts that the new hardware could account for more than 80% of the operator’s box shipments from 2017, if it is deployed across the Liberty footprint.

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