Virgin Media CEO on TiVo; Open Platform; IPTV

Comments from Neil A. Berkett (Virgin Media CEO) on the 2011 3rd Quarter results, and TiVo:

The main news on TV is strong uptake of TiVo. We have 128,000 net adds in the quarter, taking us up to 163,000 at quarter end. We've seen strong demand from both new and existing Virgin Media customers, with around 1/3 of TiVo subscribers to date being new to Virgin Media. In fact, in Q3, nearly 40% of TiVo net adds were new to Virgin Media.

Sales continued strongly since the quarter end, and as of yesterday, we have 222,000 Virgin Media TiVo customers. That is around 5% penetration of our total TV base after just one quarter of above-the-line marketing. I'm delighted in success we've had this quarter and with the positive reaction from customers. TiVo will eventually be rolled out to our entire TV base. The only question is how quickly, so we're evaluating the opportunity to accelerate this.

So why is TiVo doing so well and how is it changing customer behavior? Well, firstly, it's a superior product and our customers are loving the features. It is either a 500-gig or 1-terabyte hard drive, which can record hundreds of hours of programming. Unlike Sky Plus, it has 3 tuners so you can actually record 3 different programs at the same time as watching one you recorded earlier. TiVo really brings to life our massive, unrivaled video-on-demand library.

For example, our EPG allows customers to go backwards in time and catch up on shows they've missed. We have great search features that allow customer to discover content more easily. They can search by title, by actor, director or topic. TiVo gives intuitive programming recommendations based on the customers of viewing patterns, again, helping our customers to discover great programming on both linear and in VOD. Customers can give a thumbs up or thumbs down to individual programs to further enhance the recommendation effectiveness. In fact, the TiVo box will even record program suggestions based on viewing patterns. So even if like me, you're away and forgot to record the Mighty New Zealand winning the World Cup, if you're a rugby fan, the box will probably record it for you anyway.

The other great thing about TiVo is that it's dedicated over-the-top connection, allowing our customers to access the content and application outside our TV. Unlike in a DSL home, the bandwidth disconnection users will not impede the bandwidth of other devices they're using at the same time.

We have an open platform. We have no fear of adding to over-the-top provider as an application on TiVo because although TV is the key to the wallet for us, it is not the wallet. We make most of our margins in connectivity. We will continue to add innovative applications, like Spotify, where we're exclusively the only TV and broadband platform in the U.K. able to offer access to this music streaming service in a bundled way. We will also soon be launching our companion iPad app. Through TiVo with the first major operator to launch a TV service that will ultimately reside on everyone of our customer TVs, PCs, tablets and mobile devices. It will be the glue that brings together the TV, the PC and the mobile with a better tablet or a smartphone. It is a truly converged platform.

Others have talked about launching IPTV. We've done it. We've done it on time, on budget and it's actually the best product in the market by a long way. It's a superior service and should continue to see us acquire digitally savvy customers. Perhaps our competitors' subscribers who are attracted by the combination of the best broadband connectivity and the best TV application. It's an ARPU driver because we're charging for quality with a GBP 3 premium per month. It should also drive improved loyalty, and therefore, improve churn as we roll it out to the existing base. And that is a vastly superior service to our existing TV platform. We will also continue to add increased functionality as the year progresses. In fact, as flash-based software, it is the service that will continue to improve and evolve.

Our product today is just at the first round of a very long ladder. So how are our customers finding it? Well, firstly, they love it. Our net promoter score or customer satisfaction is much higher for TiVo than our legacy TV product. In fact, TiVo customers are twice as likely to recommend Virgin Media to their friends, by telling their friend and their family about the game-changing technology, about the content discovery and about their control. TiVo is facilitating the personalization that customers want. It's liberating them and putting them in control of their own viewing.

80% say that TiVo gives them more freedom to watch TV when they want it, 50% are watching more catch-up TV. Customers are finding the search and browse functions really, really valuable and engaging with their TV more. Half say they're watching more good quality TV, i.e. content that is more relevant to them. TiVo users love the meg of hard drive. 3/4 of our customers say they no longer have to worry about disk space. In fact, the average customers whose had the box for 3 months still hasn't filled it up. I think consumers will continue to get more and more demanding over time, that's what we're witnessing in this segment that we're targeting. With TiVo, we have a platform that we'll be able to meet, and in fact, exceed those demand.