Liberty boss says Murdochs approve of Virgin deal, dismisses Netflix threat

Rupert and James Murdoch both approve of Liberty Global’s takeover of Virgin Media and understand the need for competition in the UK market, LGI’s CEO Mike Fries said late yesterday.

Fries added that under LGI’s control, Virgin Media will not compete with BSkyB for premium sports rights. In a keynote address at the Cable Congress event in London, the LGI boss went on to dismiss the threat of Netflix, noting its high content costs and low ARPUs.

Murdoch-family controlled News Corp. is the largest single shareholder in BSkyB, the largest pay TV operator in the UK with over ten million TV customers. Virgin is the second-ranked pay TV provider and had 3.8 million pay TV subscribers at last count and 4.9 million cable customers in all.

Asked about the Murdoch’s reaction to the LGI’s US$24.3 billion takeover of Virgin Media, Fries said: “John [Malone] talked to Rupert Murdoch and I was skiing with James a few weeks ago; they think that this is a great transaction, they understand that competition has to exist in this market. The [LGI] relationship is strong with that level of the BSkyB organisation.”

Sky is has faced competition from ESPN and more recently from telco an IPTV operator BT for English Premier League rights packages in recent times, but Virgin Media will not start competing with BSkyB for premium football rights, Fries said.

The LGI boss said the main threat for MSOs was not DTH or OTT services, but telcos. He dismissed the threat of Netflix, which competes with Virgin Media in the UK and is rolling out in new international territories.

“I think the Netflix business model is challenged, 70% of revenues go to content providers,” Fries noted, adding that with a low subscription fee, profit per sub is also low compared with the typical ARPU of a cable customer.

LGI is rolling out a suite of on-demand and interactive services via its next-generation Horizon set-top box service and this, with the infrastructure and customer base already in place, means cable is better positioned than Netflix, Fries said. “If we do our job properly, they don’t have a shot,” he added.

Speaking about OTT services in general he said: “The OTT issue is mostly teaching us what we already know – that people want to consume video in certain ways.” He added: “Horizon means there’s no reason [for customers] to go anywhere else.”

How Horizon will co-exist with Virgin Media’s own TiVo next-generation set-top remains unclear and ahead of the deal closing no decisions have been made, said Liberty’s chief. At last count 1.33 million Virgin Media customers took the TiVo box, about 35% of all TV subs.

LGI’s Virgin Media deal is slated to clear the relevant regulatory hurdles and close by May. The acquisition of Virgin Media will create the world’s largest cable operator with 25 million customers.