So what would be a reasonable price for Virgin to pay SKY for SKY Atlantic?
In 2008 Virgin and SKY agreed a new carriage of "basic" channels covering Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts 1, Sky Arts 2, Sky Real Lives and Sky Real Lives 2. That is a total of 9 channels. The deal, according to The Guardian, cost Virgin up to £38 million per year.
http://www.guardian.co.uk/media/2008...ss?INTCMP=SRCH
http://mediacentre.virginmedia.com/S...ments-117.aspx
So under that carriage deal Virgin where paying roughly up to £4.2 million per channel annually. I however suspect that would not have been the exact rate per channel. SKY 1 probably cost more than SKY Real Lives 2 annually for example. Another thing to remember is none of these channels where in HD and none of the content was available on demand or catch up. The deal was also agreed 6 years ago when the VIP package was only £85 per month compared to the £114 per month it is now. That is a 34% increase. We have seen significant inflation in the TV market accross the board regardless of TV provider. The Premiership football rights are getting out of control.
SKY signed a 5 year deal with HBO costing a total of £150m, or £30m per year. This of course doesn't include the rights to other shows SKY pick up from Showtime, FOX etc... In terms of their deal with HBO, home grown content and other material SKY must be spending about £40m annually on content and running the channel give or take a few million.
If Virgin and SKY agreed roughly up to £4.2 million annually for the likes of SKY 3 and SKY News 6 years ago, what would a realistic price be for SKY Atlantic now? If Virgin want SKY Atlantic, SKY Atlantic HD, SKY Atlantic on demand, SKY Atlantic catch up and access via Virgin Anywhere it's going to be a high price surely. Once you take inflation into consideration and SKY's running costs for the channel, and even an exclusive deal to keep it off BT, it would have to be between £8 million and £11 million annually?
SKY might be asking for even more. If SKY are investing potentially £40 million into the channel each year, they might not want to give another provider like Virgin or BT access cheaply. When SKY and Virgin agreed the new carriage deal for SKY basics channels in 2008, they also agreed a new deal for Virgins channels being Living, Living 2, Bravo, Bravo 2, Trouble, Challenge and Virgin 1. Both new carriage deals cost both companies virtually the same. Both brought their basic channels to the table and agreed a deal that left neither really better or worse off financially. Both pretty much got out what they put in. Virgin now have nothing to bring to the table.