There is potential for the Virgin Media to emulate BSkyB's strategy and harness OTT services to target homes not enabled for its walled-garden cable TV VOD service. If anything this concern is more pressing for Virgin Media than it would be for Sky as the cable operator has traditionally been restrained by its limited footprint. Seen in this light it is not surprising that the launch of the online movies service forms part of a wider effort by Virgin Media to step up its OTT content provision, with the company planning to launch an online TV service later this year.

However, in its current iteration the Virgin Media service may struggle to gain traction as consumers have generally proven unwilling to pay for content that is tethered to the PC. Online movie spending is driven by hardware-based services that enable users to consume content on other screens, a fact borne out by the closure of 42 standalone, PC-based online movie stores in 2009.

To develop a significant audience Screen Digest believes that the service must explore devices that allow content to be consumed away from the PC screen, notably connected TVs and BD players. However this maket is shaping up to be very competitive too with a high profile market entry from Sky with its Sky Player and could be expanded further under a successful launch of hybrid open Internet/DTT platform Project Canvas (the JV from the BBC, ITV, Channel 4, Five BT, TalkTalk and others).

It is also worth noting that FilmFlex has indicated it intends to offer the service on a white-label basis, so even if Virgin were to agree deals with some of the consumer electronics manufacturers offering online content services for their connectable devices, it may end up competing directly with the same service under a different brand in an increasingly crowded marketplace.