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February 8, 2012

Virgin Media looking to boost ‘on demand’ video offerings

Virgin Media announced that it has doubled its TiVo user base in the last quarter, and will be adding some 620 jobs to its offices to cope with the future demand for the service.

By Vinod

The company announced its fourth quarter results, which saw revenues up 3.0% to £4.0bn for the year, and up 2.0% to £1.0bn for the quarter. It also saw a net income of £76m for the year, the fledgling company’s first annual profit since its inception in 2007.

This came on the back of strong TiVo and superfast broadband growth. Virgin’s TiVo customer base doubled in the fourth quarter, with 273,000 net additions bringing the total to 435,000 TiVo customers at the year-end, or 12% of its total TV customers.

CEO Neil Burkett believes the company’s resilience reflects its strong business model. Virgin Media is the only "quadruple-play" media company in the UK, offering television, internet, mobile phone and fixed-line telephone services.

"Our strategy of focusing on customers who want more from the digital world is paying off. With the number of TiVo customers doubling in the final quarter of the year, our new TiVo service is attracting both new and existing customers. Since its commercial launch mid-way through the year, the number of TiVo subscribers has grown to almost half a million with a large and growing proportion now using its next generation functionality on a regular basis," he said.

Strong demand for the company’s superfast broadband (30Mb and above) saw a growth of 133,000 customers. The company also announced last month that it would be doubling its customer’s broadband speeds at no extra cost.

"Demand for better broadband also continues to grow fast, with around half of new customers choosing superfast speeds. The combination of the best TV experience and the best broadband, has enabled us to acquire more new customers in the quarter," Burkett said.

The boost in Virgin Media’s broadband and TiVo services means the company is hiring a further 620 staff to cope with the demand. The majority of these will be based in Swansea and Manchester. 120 of these will be trainee engineers in the company’s apprenticeship scheme, and a further 500 will be in customer service and call centre roles.

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"This investment will benefit a number of communities across the country and we’re particularly proud that we’re able to provide so many young people with a much needed start in these challenging economic times," said Paul Buttery, chief customer and networks officer.

The company’s business division saw 13.9% revenue growth for the quarter, and 6.8% for the year. Much of this growth came through large contract wins, such as Mobile Broadband Network Ltd (MBNL), Volkswagen Group and the Driver and Vehicle Licensing Agency. The company saw strong growth in data, with retail and wholesale up 14.6% and 11.2%, respectively for the full year.

Managing Director of Virgin Media Business, Mark Heraghty, has also been happy with the performance of its new "Big Red VPN" product, which provides unconstrained bandwidth across a customer’s VPN (virtual private network).

"Our focus remains on being the trusted supplier of managed services to organisations across the UK. We’ll continue to be the leader in the public sector, providing local government with the very best communications technology while further developing our position with central government. We’ll also maintain our focus on the mobile market by continuing to give operators access to our fibre optic network and so provide them with the power they need to prepare for 4G. Finally, we’ll continue to enhance our network to enable businesses across the country to make their technology work harder for them. With all this, we anticipate 2012 to be another year of good momentum and progress," he said.

The company also added 15,000 new retail cable customers in the fourth quarter, and the company’s average revenue per user was up 0.7% to £47.85.

The company’s VirginMobile contract customers were also up 26% in the year to 1.5m, with a 101,000 contract additions into cable homes in the quarter.

Like its main competitor, BSkyB, Virgin Media are nervous about the rise of internet ‘video on demand’ services, such as LoveFilm and Netflix, which will start eating into its traditional Pay TV model. As broadband speeds get faster, traditional broadcast TV will be made redundant.

Virgin Media says viewers were watching ‘linear broadcast TV’ in similar numbers to 2010, but its TV on Demand service has jumped to over 1bn views, up 14% on 2010.

Virgin Media is better placed here than Sky. Virgin TV is the UK’s only cable TV provider, which can be converted to broadband at a later date when internet TV takes off. Sky’s TV service is based upon satellite broadcasts.

Sky has been aggressively rectifying the imbalance, pushing its own ‘push video’ service SkyAnytime to a truce with the BBC’s iPlayer, and a recent investment in social media TV interactivity with UK startup Zeebox.

According to Bloomberg, Virgin is already in discussions to carry LoveFilm and Netflix on its TiVo service.

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