Liberty Global’s permeation of Plume WiFi last week provided some crucial strategic insight into the cable giant’s strategy while leaving its video business up in the air. Shortly after, Liberty Global’s fourth quarter results filing arrived which finally shone some light on the operator’s TV strategy – confirming that TiVo’s long-standing reign at the Virgin Media operation in the UK will soon be swept aside for the RDK-based Horizon 4 platform.
It comes as Liberty Global lost a total of 272.400 net video subscribers during 2019 of which an accelerated 91,300 came in Q4, excluding the VodafoneZiggo joint venture in the Netherlands.
Interestingly, Mike Fries pointed to Sky’s numbers for comparison – saying the rival operator has lost millions of satellite subscribers, a portion of which Sky has converted to Now TV. Fries claims Liberty has done “much better” than many rivals, which is true in terms of total pay TV losses, yet Fries cannot flaunt an equivalent to Now TV.
Liberty Global’s aging strategy has long been about converting basic video subscribers to enhanced video subscribers to increase ARPU, which has served Liberty well in recent years, but enhanced video subscribers are now dropping off, to the tune of 77.600 in the UK during Q4, 15,100 in Belgium and 21,800 in Switzerland. After shuttering the SVoD service MyPrime, Liberty Global has no plan B in video and before long it will be virtually a pure broadband business selling high-end cable video packages to a select few.
Still though, Fries and co. continue to wax lyrical about prioritizing profitable video subscriber growth, rolling out advanced set tops and integrating third-party apps. In the company’s earnings call late last week, Fries said, “We generate better gross margin than the US guys and so it’s worth protecting and we are rolling out our advanced user interface very shortly called Horizon 4 to replace TiVo and be available on the V6 box.”
We first heard about Virgin Media testing the RDK-based Horizon platform on V6 hardware back in October, in a similar strategy to Comcast with its Xfinity X1 platform. Horizon takes a much heavier cloud-based approach to control and functionality than TiVo. Dropping TiVo and moving everything in-house definitely looks more like a cost saving exercise triggered by a reverse in UK video subscribers, rather than about launching exciting new features for the UK market.
While TiVo pioneered DVRs, the company’s products have become increasingly expensive compared to rival set tops and so the company has been forced towards a rental model through cable TV providers like Virgin. The V6 set top launched in 2016, supplied by Arris and powered by TiVo software.
Of course, while Comcast is considered the founding father of the open source RDK technology, Liberty Global is among the contributors to the joint venture, along with Charter Communications.
TiVo could be in real trouble after losing the Virgin Media contract, although we saw the writing on the wall way back when Balan Nair (the former Liberty Global CTO and now CEO of Liberty Latin America) completed the development of Horizon and said eventually all Liberty advanced TV subscribers would be using the platform. Clearly TiVo did too, having undergone a major reorganization and eventually announced a merger with semiconductor and audio technology developer Xperi a month ago.
No confirmed timeframe has been issued regarding the TiVo switch out at Virgin Media just yet, but it is expected to go live sometime in the second half of this year – and we’ll be keeping a close eye on how TiVo picks itself up from losing such a major customer.
Of course, Liberty’s UK operator Virgin Media became a trendsetter 7 years ago when it embraced Netflix onto its set tops in a love affair that was only last week renewed in a multi-year deal covering 11 million video subscribers across Europe.
“We’ve got Amazon. We’ve got YouTube. We’ve got Netflix. We are open for business when it comes to an app integration and that is going to make our platform we think sustainable and viable and even necessary for consumers who want to lean back, watch television and get access to whatever they’re interested in by simply saying to their remote control, play Netflix,” said Fries on his company’s earnings call.
There are now under 3.7 million UK-based video subscribers (100% enhanced), 1.87 million in Belgium (91% enhanced), 1 million in Switzerland (60% enhanced), 280,400 in Ireland (100% enhanced), 1.26 million in Poland (85% enhanced), and 171,300 in Slovakia (83% enhanced).
The data Liberty is less keen to break out includes annual subscriber variance by country. Of the 272,400 net video losses incurred last year, almost 68% were in the UK, while 27% were in Belgium and 26% in Switzerland. Marginal gains kept business steady in Ireland and Slovakia, while Poland was the best performing region for subscribers in 2019 with gains of 40,400 for the full year.
Q4 2019 revenue was virtually flat at 0.5% decline to $2.98 billion, while cable revenue decreased 0.9% year on year to $1.9 billion.
Meanwhile, the broadband business saw continued positive gains with the exception of Switzerland and Belgium in the fourth quarter, where 12,100 and 8,700 internet subs cut the cord, respectively. Across the UK, Ireland, Poland and Slovakia, 60,000 new internet subscribers joined in the fourth quarter.
The graph above does not exactly paint a picture of doom and gloom for Liberty Global and indeed the situation is much less severe than what the US is experiencing, but a trend is a trend.