When Virgin Media launched in February, few would have predicted the entrant to the pay-TV market would find itself locked in an acrimonious public battle with BSkyB over carriage fees.
The dispute centres on fees for Sky's basic channels: Sky One, Two, Three, News and Sports News. Sky pulled the channels from Virgin after talks broke down in February. Virgin, which accuses Sky of abusing its dominant position, has taken the case to court and it is likely to drag on for at least another year.
The feud has been marked by a barrage of tit-for-tat ad activity, which has arguably created the most entertaining media conflict of the year. Since Virgin Media's debut, the two firms have spent a combined sum of almost £92m on promotional activity; Sky spent nearly £60m between 1 February and 30 June, while Virgin has invested £32m, according to Nielsen Media Research.
But rather than strengthening the position of the two, these campaigns may actually have confused customers and eroded the Virgin Media brand.
Sky's most recent ad campaign cites its rival's tie-up with Setanta Sports, urging consumers 'not to score an own goal with Virgin Media's new offer'. Setanta Sports is to provide free sports content to Virgin's premium-package customers as well as a stand-alone football-news channel - a joint venture that is also expected to launch on Freeview. This latest tranche of ads follows the unprecedented decision by both companies to publish open letters airing their grievances.
Industry insiders suggest that neither brand expected the row to go on for so long or to be played out in such a public fashion. Moreover, neither of them is benefiting from it, according to Chris Hayward, head of investment at ZenithOptimedia. 'There is a strong possibility that these campaigns are causing confusion among consumers and the increasingly aggressive approach is bound to have a negative impact,' he says.
Ivan Pollard, partner at media agency Naked Communications believes that this form of direct comparison-based advertising is traditionally the refuge of the unimaginative. 'It doesn't create any emotional engagement among consumers - or make them favour one brand over the other,' he says.
Not surprisingly, Virgin and Sky are each blaming the other for the spat, which, as the dispute over carriage fees continues, shows no sign of an imminent conclusion.
'If the sole point of your ad is to kick the shit out of the competition, then it is confusing,' says James Kydd, managing director of marketing at Virgin Media, says. He adds that consumers are 'bored rigid' by brands going head to head. 'Sky has invested a huge amount in press ads designed to knock Virgin, but we haven't increased our spend,' he says.
However, Christian Cull, head of customer communications at Sky, claims the key issue is not attacking Virgin, but ensuring consumers have all the information they need to make an informed decision. 'Virgin has been inaccurate and misleading in its ads and we have run ads to reveal its hidden charges,' he says. The strategy is paying dividends, according to Cull, who claims consumers are joining Sky in record numbers.
Graham Hales, executive director of Interbrand, says that while an aggressive attitude has worked for the Virgin brand in the past - namely for Virgin Atlantic's campaign against British Airways - Virgin Media's brand positioning is less straightforward. 'Customers who thought they could watch their favourite shows on Sky One and can't, will find it much more difficult to see Virgin in a favourable light,' he says.
The fact that Virgin's full cable-TV network is available in only 50% of homes, compared with Sky's triple-play offering, which is available in 70%, also puts the brand on the back foot. In non-competitive rural areas Sky's market positioning is relatively protected, making urban centres the key battleground for the pay-TV rivals.
Critics have argued that the Virgin Media launch was little more than an elaborate, marketing-led rebadging exercise, but the launch of its Virgin One channel on Freeview and the increased investment in content, reflected by the joint venture with Setanta seems to contradict this.
Virgin One will also provide a key marketing platform for the broader Virgin portfolio not only by providing a valuable advertising channel, but also giving consumers a taste of Virgin Media's paid-for offering. The deal with Setanta could also afford the brand more leverage among Sky's big audience of sports subscribers.
Despite the row with Sky, most agencies agree that the advent of the Virgin Media brand, which has put huge pressure on its rival's sales house, is a good thing for the market.
'The Virgin brand is a stronger consumer proposition than NTL or Telewest, which may attract more subscribers into the pay-TV market as a whole,' says Phil Wise, head of broadcast at Mediaedge:cia. 'The fact that Virgin is strengthening its proposition with new shows is a good thing for advertisers.'
Looking ahead, while the potential sale of Virgin Media could signal an end to the feud with Sky, insiders say the extent to which it would affect strategy, or result in a complete rebranding of the channel, has been overstated. For Virgin Media it is business as usual, which means a ceasefire is off the agenda.
'When you are the number-one brand in the UK, you don't have to get into the boxing ring,' says Virgin's Kydd. However, the latest campaign from Sky suggests its gloves are already firmly on.
This article was first published on Marketing