Virgin Media 2009 Annual Report Download - page 77

Content Segment
The summary results of operations of our Content segment, which, following the disposal of our
sit-up reporting unit, represents solely our Virgin Media TV operations for the years ended
December 31, 2008 and 2007 were as follows (in millions):
Year ended
December 31,
2008 2007
Revenue .............................................. £121.8 £109.5
Inter segment revenue .................................... 25.7 24.4
Segment contribution ..................................... (4.6) 8.4
Revenue
For the year ended December 31, 2008, Content segment revenue increased by 11.2% to
£121.8 million from £109.5 million for the year ended December 31, 2007. This increase was primarily
due to increased advertising revenue, partially offset by the loss of revenue from our program rights
licensing business which was disposed of in July 2007.
On November 4, 2008, we signed a new carriage agreement with BSkyB for continued carriage of
our Virgin Media TV channels on its satellite platform, effective from November 13, 2008. The new
agreement provides for an increase in the annual carriage fee from £6.0 million to £30.0 million, plus a
capped performance-based adjustment (allowing for maximum additional payment of up to £6.0 million
and £8.0 million in years one and two, respectively, and up to £7.9 million in the final seven months of
the term). The new carriage agreement expires in June 2011.
Content Segment Contribution
For the year ended December 31, 2008, Content segment contribution decreased to a loss of
£4.6 million from an income of £8.4 million for the same period in 2007. This decrease is mainly due to
an increase in programming costs, particularly in respect of Virgin1, together with the non-recurrence
in 2008 of gains totaling £13.0 million relating to the favorable settlement of certain long standing
contractual issues in 2007.
Television Channel Joint Ventures
We own 50% of the companies that comprise UKTV, a group of joint ventures formed with BBC
Worldwide. UKTV produces a portfolio of television channels based on the BBC’s program library and
other acquired programming and which are carried on Virgin Media’s cable platform and also satellite.
Some channels are also available on Freeview.
We account for our interest in UKTV under the equity method and recognized a share of net
income of £18.7 million in each of the years ended December 31, 2008 and 2007. At December 31,
2008, our investment in UKTV was carried on the balance sheet at £353.5 million, which includes
outstanding loans totaling £137.7 million.
UKTV receives financing through loans from Virgin Media, which totaled £137.7 million at
December 31, 2008. These loans effectively act as a revolving facility for UKTV. We received cash
payments from UKTV in the form of loan capital repayments of £8.6 million for the year ended
December 31, 2008. We received dividends, interest payments and payments for consortium tax relief
from UKTV totaling £38.1 million during 2008.
Additionally, we recorded a loss of £4.3 million and £1.0 million in the years ended December 31,
2008 and 2007, respectively, from our investment in our joint venture with Setanta Sports News.
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