Virgin Media U.K. Pay-TV Service Adds Netflix in First

Virgin Media U.K. Pay-TV Service Adds Netflix in First

Netflix Inc. (NFLX)’s subscription-video service will be offered on Virgin Media Inc. cable systems in the U.K., marking the first time the Web-delivered product is integrated by major pay-TV provider. Virgin Media, purchased this year by John Malone’s Liberty Global Plc (LBTYA), will begin testing Netflix with 40,000 customers who use TiVo set-top boxes, according to a statement today. The feature, which requires a Netflix subscription, will be available this year to all 1.7 million of its TiVo users.The agreement marks a breakthrough for Netflix and blurs the line between traditional pay-TV and so-called over-the-top services, such as Netflix and Amazon.com Inc.’s U.K.-based LoveFilm, that are delivered through the Web. Virgin Media customers will be able to search for Netflix shows on the same screen guide they use for pay-TV programming.

“We’re delighted to be bringing yet another groundbreaking service onto TV screens in millions of Virgin Media homes,” Dana Strong, Virgin Media’s chief operating officer, said in the statement.

Virgin Media, based in New York, had 3.77 million customers at the end of June, all in the U.K. Of those, 44 percent use set-top boxes from San Jose, California-based TiVo, the company that pioneered digital-video recorders. That’s up from 25 percent a year earlier, according to Virgin Media.

With TiVo’s system, a viewer searching for shows featuring actor Kevin Spacey would see on a single screen options for “The Usual Suspects” from Virgin Movies and “House of Cards,” a Netflix original, said Gareth Mead, a Virgin Media spokesman.

Web Separation

Netflix, based in Los Gatos, California, is widely available on game consoles, televisions and Blu-ray players.

While TiVo software lets users search on a single screen for content across pay-TV, online subscription services and on-demand sites, cable and satellite operators that offer TiVo boxes to their customers typically disable the feature. The danger is that viewers will defect to the Web and stop paying for the more expensive programming.

“It’s the first time Netflix has ever been added to an operator box,” said Steve Wymer, a spokesman for TiVo. “It’s a big deal, especially if it busts open the gates for operators globally to integrate streaming.”

Rather than spend money on sports rights or other exclusive programming, Virgin Media has focused on the speed of its broadband service as a plus as it competes with British Sky Broadcasting Group Plc (BSY) and BT Group Plc (BT/A) for pay-TV customers. The deal with Netflix underscores that effort.

Netflix rose 0.9 percent to $294.15 yesterday in New York. The shares, which have more than tripled this year to lead the Standard & Poor’s 500 Index, are at their highest since the stock’s record close of $298.73 on July 13, 2011. TiVo advanced 1.3 percent to $11.96 and has lost 2.8 percent this year.

John Malone’s Liberty Global completed its acquisition of Virgin Media in June. The company, based in Englewood, Colorado, fell 0.3 percent to $76.78 yesterday in New York. It has climbed 22 percent this year.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net