Liberty Global’s takeover of Virgin Media is now set to go ahead following clearance from the European Commission on competition grounds.
The $23 billion acquisition, which will combine Europe’s and the UK’s largest cable operators, has been deemed unlikely to stifle competing pay-TV operators because of the number of alternative distribution platforms available in the markets where the enlarged Liberty Global group will operate.
Although Liberty Global supplies pay TV channels such as Extreme Sports Channel, CBS Reality and Horror Channel, the commission said that the merged firm was unlikely to shut out competing pay-TV retailers by withholding channels, “given its very limited presence in the wholesale supply of TV channels and the incentive to license its TV channels as broadly as possible.”
The commission added that the buyout would not squeeze out competition because "TV content is licensed mainly on a national basis or for linguistically homogeneous areas and because the merged entity would still face sufficient competitive constraint from other players, such as TV content providers and competing Pay TV retailers."
The takeover is significant in several respects. It reinforces Liberty Global’s position as the dominant European cable operator with a very strong position in most of the leading markets, including Germany, the UK and the Netherlands. It also renews hostilities between Liberty Global’s chairman John Malone and Rupert Murdoch, whose News Corporation owns 39 percent of BSkyB, the UK’s leading pay-TV operator with over 10 million pay-TV customers. Virgin Media is number two in the UK with 3.7 million customers.
Rupert Murdoch and John Malone last faced each other in a pay-TV battle a decade ago when they vied for control of the biggest U.S. satellite pay-TV operator DirecTV. This was resolved by Murdoch’s News Corporation selling its one-third stake in DirecTV to Liberty Group. In return, Liberty Group sold its 16-percent stake in News Corp to Murdoch, handing back full control of the company he founded.
There is also the side plot over Virgin Media’s contract with DVR maker TiVo, which has collaborated with Virgin Media to develop a hybrid TV service that has been very successful in merging OTT content with the broadcast service. Liberty Global has its own strategy for hybrid TV based on its Horizon platform, comprising a box made by Samsung, with UI interface and middleware from Cisco and some enhancements from Liberty Global itself. While some analysts have predicted that Liberty Global will eventually impose Horizon on the UK customer base acquired from Virgin Media, the TiVo platform has been highly successful and is technically superior in some respects.
The relationships between Virgin Media and TiVo has four years to run and Liberty Global has indicated it does not want to disturb its success. Four years is a long time in pay TV, so speculation over the future of TiVo in the UK is idle at this stage.