Sky takes ball and goes home

OPINION: Customers of Virgin Media sitting down to watch Ultimate Volcano on Sky One last night were shut off a minute into the programme and presented with the following message:

Thanks to Sky, the Sky One channel is no longer available. They've picked up their ball and gone home. Foul play? We think so. To have your say, visit virginmedia.com/fairplay

Of course, the disconnection of Sky One is no more Sky's fault than the absence of a Ducati motorcycle outside my house is the fault of Ducati - if I (or Virgin Media) paid the money then it would be there.

But this situation has more to do with IPTV than it does with broadcasters waving handbags at each other.

Sky has long understood the importance of owning content - originally with football and, more recently, with populist US shows such as Nip/Tuck and Grey's Anatomy, not to mention the all-pervading Simpsons. So Sky quickly sealed up deals for broadcasting those shows, and some viewers will now be switching to Sky to watch them.

But while Virgin Media can't get a deal to broadcast the shows, it can sign, and is signing, deals to provide them over its on-demand service. This devalues the importance of broadcast rights to the shows, and has allowed Virgin to stand firm against Sky's demands for more money - you can be sure that without such a capability Virgin Media would have caved to Sky's price-hike - as its predecessors were forced to do.

The fact that no one was going to back down is obvious from the advertising both companies have been running - Sky telling people that the only way to get shows is through its service, while Virgin is playing the little guy and appealing to our national love of the underdog.

In fact, this development could work to Virgin's advantage as it tries to migrate customers towards an on-demand future where every show is paid for individually. The only question is if customer acceptance of on-demand is strong enough to convince them that the Sky just isn't the limit any more.