Yahoo Finance ITV boss Dame Carolyn McCall seeks peace deal in fees war with Virgin Media
New ITV chief executive Dame Carolyn McCall has ditched a long-running campaign by the broadcaster to force Virgin Media to pay tens of millions of pounds per year to carry its main channel.
In one of her first big decisions it is understood that Dame Carolyn has adopted a more flexible approach in negotiations with the cable operator, which is owned by ITV’s own biggest shareholder Liberty Global.
Prior to the former easyJet chief executive’s arrival in January, ITV was demanding up to £80m from Virgin Media in direct payment for its main channel. The bill came with the threat of a blackout in millions of living rooms if Virgin Media did not agree to pay up by a deadline in spring.
According to industry sources Dame Carolyn is instead focused on agreeing a much broader deal that could still mean ITV is paid more for its overall package of channels.
Crucially, however, it is expected that the main public service channel will continue to be supplied for free without so-called “retransmission fees” due.
It is understood that Virgin Media is considering buying a package of advertising slots as part of the deal.
ITV is also said to be seeking new guarantees on the prominence of its programming as cable viewers increasingly watch on-demand programmes from Netflix and others as well as traditional broadcasters.
Negotiations are ongoing and it remains possible that ITV and Virgin Media will not agree a deal, but sources said the threat of a potentially mutually damaging stand-off appears to be receding.
Virgin Media had firmly refused to pay for ITV’s main channel and was considering circumventing a blackout by effectively pirating signal if its feed was cut off.
ITV's public service channel is currently supplied to all pay-TV operators for free.
In his attempt to make the company less reliant on advertising, previous chief executive Adam Crozier mounted a long campaign for retransmission fees. ITV lobbied successfully to close the loophole in copyright law relied upon by Virgin Media as a bulwark against extra costs in its television business.
Together with chairman Sir Peter Bazalgette, Mr Crozier argued that pay-TV operators benefit unfairly from ITV’s investment in programming. They aimed to use the legal uncertainty caused by the closure of the Virgin Media copyright loophole, created deliberately in the Eighties to encourage investment in cable networks, to press for retransmission fees.
Sky was not significantly affected by the change as it does not need to process – or retransmit – ITV’s main channel to broadcast it via satellite. However it is watching talks between ITV and Virgin Media closely as it prepares to shift millions of households onto internet-based services over the next few years.
City analysts had suggested that retransmission fees from Sky and Virgin Media could have been worth as much as £140m per year to ITV in virtually pure profit.
Dame Carolyn is instead said to be pursuing a broader and more collaborative relationship with pay-TV operators as she aims to boost ITV’s profits from outside its advertising business in the next few years. Her first major appointment, strategy director Julian Ashworth, hired from BT, is due to focus on building up subscriptions.
Under its previous management the broadcaster introduced a subscription version of its ITV Hub catch-up service and Britbox, a US streaming service in partnership with the BBC. Both are yet to make a significant impact on ITV’s finances.
UK broadcasters and pay-TV operators are both facing an assault from US tech giants, with Netflix, Amazon and Apple ploughing billions into programming to supply their streaming services.
ITV and Virgin Media declined to comment.
