Virgin Media Inc.
), a leading cable multi service operator (MSO) of the United
Kingdom, is planning to offer video streaming as a service
following its takeover by media conglomerate
Liberty Global Inc.
). Currently, Virgin Media offers entertainment and communication
services to the retail and enterprise customers.
Currently, higher adaptations of Internet service are
restricting users from downloading large multimedia files and
videos quickly. Streaming services resolve this issue as they
display the images before the completion of the entire download.
Internet users find it easier to view movies or live games via
streaming, thus affecting the market share of cable MSOs.
In an attempt to take advantage of the current boom in the
streaming service industry, Virgin Media wants to come up with
its own streaming option. Virgin Media wants to add as much
content as they can on the streaming platform to popularize the
service among its customers. Offering this service will put the
company in direct competition with low-cost streaming companies
) and Hulu.
Last month, Liberty Global agreed to acquire Virgin Media for
a total consideration of around $16 billion. The deal, once
completed, will produce cost synergies of $180 million for
Liberty Global, apart from helping the company to establish a
strong foothold in the BSkyB dominated U.K. cable market.
BSkyB has 10.7 million subscribers, compared with Virgin
Media's 4.9 million. Successful integration of Virgin Media with
Liberty Global will create a dominant force in the highly
lucrative U.K. pay-TV market and will allow it to compete better
with streaming companies. We believe this is a strategic move by
Virgin Media to retain its customers, who are switching to
streaming companies to negate their high cable bills.
On the downside, however, providing streaming service from its
own portfolio could dampen the future prospect of Virgin Media's
own cable business. As customers will be able to watch their
favorite shows via streaming, they could eventually switch to a
lower monthly cable plan, thus impacting the company's
Currently, Virgin Media carries a Zacks Rank #4 (Sell).
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