BSkyB has agreed to buy Virgin Media's basic channels as the two former fierce rivals develop strategies to compete with the soon-to-arrive free Internet-connected TV services.
The satellite group BSkyB will pay up to £160m cash to expand its portfolio of basic pay TV channels, which will include Living, Bravo and Virgin1. It will also assume responsibility for selling advertising around the channels from 2011.
Virgin Media, which has pursued a strategy of providing access to content through its superfast technology instead of owning it, has also agreed a deal that allows it access to Sky's basic channels, including the ones it has just sold.
Sky and Virgin have previously clashed over the rates they paid each other for access to channels, which was resolved in late 2008.
As part of the deal, Virgin Media will also pay an incremental wholesale fee to show any of Sky's basic, sports and movie channels in high definition.
"VMtv is an attractive investment opportunity which complements our existing content business and delivers strategic and financial benefits," BSkyB Chief Executive Jeremy Darroch said in a joint statement.
Both BSkyB and Virgin Media compete with the Freeview digital television service which offers numerous channels for free and has grown strongly in recent years.
It is also expected to be boosted from next year when it offers a multi-channel platform with access to the Internet and on-demand viewing.
City A.M. Reporter