By Eric Pfanner Sunday, March 4, 2007 LONDON: For 3.3 million cable television viewers in Britain, "Lost" has disappeared. So have several other popular American series, including "24" and "The Simpsons." The shows vanished from cable last week when British Sky Broadcasting, the satellite television company, pulled several of its channels, including those that broadcast the U.S. series from Virgin Media, the main cable provider in Britain. The companies ostensibly ended their relationship because of a simple disagreement over the cost of carrying the channels on cable. But analysts say that the dispute boiled over publicly because the companies are fighting a broader battle over the British pay-TV market. This has turned the likes of Homer Simpson and the castaways of "Lost" into pawns for some far more powerful media figures: On one side, Sir Richard Branson, the British entrepreneur behind the Virgin brand; on the other, the Murdochs. Rupert Murdoch's News Corp. is the largest shareholder in Sky, and one of his sons, James, is the chief executive. Sky, with more than eight million subscribers, has long dominated pay-TV in Britain, relegating cable to also-ran status. Suddenly, however, Sky faces a revitalized competitor in Virgin Media, the result of a recent merger between the two main cable providers, NTL and Telewest. Branson entered the picture when the combined company bought the British operations of Virgin Mobile, giving him a stake in the cable operator, which licensed the Virgin brand name from him. Branson, who has climbed aboard airplanes, hot-air balloons and elephants for marketing stunts that helped build Virgin Atlantic Airways into a competitor to British Airways, wasted little time in trying to raise Virgin Media's profile. Last autumn, Branson prodded Virgin Media to explore a bid for ITV, the largest commercial broadcaster in Britain. But that effort failed when Sky instead swooped in, buying a 17.9 percent stake in ITV — enough to foil Virgin Media's efforts to add a big content-creation and over-the-air broadcast business to its portfolio. Virgin Media cried foul, protesting that Sky's move went against the spirit of British rules on concentration of media ownership, given that News Corp.'s British assets also include several newspapers — the Sun, the Times and the News of the World. British media laws state that Sky can own up to 20 percent of ITV, as long as it does not exert undue influence, but the government announced last week that it had asked the media regulator, Ofcom, to examine the deal. Analysts say an Ofcom investigation, regardless of the outcome, was probably a political necessity, given a perception that News Corp.'s papers have been cozy with the Labor government of Prime Minister Tony Blair. That image was strengthened by widely published photos showing Rupert Murdoch seated next to Gordon Brown, the chancellor of the Exchequer and the presumptive heir to Blair, at a panel discussion during the World Economic Forum in Switzerland in January. After Sky's ITV deal, Branson accused the government of being "scared stiff" of Rupert Murdoch. Branson said in an interview with the Daily Telegraph that he felt no personal hostility. "I like him, actually," Branson said. "If you asked him the same question about me, you would get the same answer." Neither Rupert nor James Murdoch has commented publicly on the dispute with Virgin Media. A spokesman for Sky said accusations that the investment in ITV would weaken media choice in Britain "don't hold up," given that the satellite broadcaster offers a range of different news channels. "Virgin is not a victim," the spokesman said. "Virgin is trying to use regulation as a commercial tool." The Branson-Murdoch rivalry moved out of dealmakers' suites and regulatory offices and into viewers' living rooms with the decision by Sky to withhold its channels from Virgin Media. Several weeks ago, Sky had already antagonized Virgin Media by running advertisements warning cable viewers that they might lose access to channels like Sky One, which shows "Lost," and Sky's 24-hour news channel. Virgin said it objected to Sky's attempt to raise the fees for running the channels on cable, despite the fact that viewership has fallen. Sky maintained that the price increases were justified because it was adding new channels to the package for Virgin Media, and because of additional investments in the existing ones. The claims and counterclaims, detailed in a flurry of newspaper advertisements and press releases last week, grew more strident as the deadline for the negotiations approached last Wednesday, with each side accusing the other of acting in bad faith. At one point, Virgin and Sky even argued over who had initiated a telephone call between James Murdoch and Steve Burch, the Virgin Media chief executive. Behind the seemingly petty aspects of the dispute are big changes in the competitive relationship between the two companies, Virgin Media said. "This is not just about the carriage agreement," said Neil Burkett, chief operating officer of Virgin Media. "We now have a very viable proposition under the U.K.'s most loved and best- known brand." Cable television has suffered from a reputation for bad customer service in Britain, analysts say. Burkett said Virgin Media was taking steps to improve that, along with making investments in video on demand and improved content offerings. The company is also trying to appeal to customers by marketing a "quad play" of telecommunications and media services — television, fixed-line and mobile phone calls and broadband — in one package. Sky has responded to that challenge by rolling out its own broadband offering. Both sides, facing a threat from free digital television beamed over the airwaves, have also announced plans to add so-called digital terrestrial services. Both Virgin Media and Sky may have to do a bit of damage-control in the meantime, analysts say. Virgin Media tried to make light of losing the Sky channels. On its electronic program guide, it briefly replaced the slot for Sky News on Thursday morning with a listing reading, "Sky Snooze, try BBC." But Virgin Media later bowed to pressure from a consumer group, the National Consumer Council, announcing that it would allow customers to cancel their subscriptions with no penalty because of the loss of the Sky channels. Burkett at Virgin said that he did not expect negotiations on the Sky channels to be reopened. For its part, Sky has said that it stands to forfeit about £60 million, or $116 million, a year from the loss of channel carriage fees from Virgin Media, as well as from reduced advertising rates, because the channels will now reach 3.3 million fewer viewers. Sky appeared to be gambling that it would make up some of that lost revenue by appealing to Virgin Media subscribers who cannot live without "Lost." "There's only a certain amount of premium content," said James Healey, media analyst at Ernst & Young in London. "And if you've got that, you may not be willing to play nicely with the other children in the group."