Freeview has enjoyed a record spike in interest as disgruntled Virgin Media customers seek ways to watch channels such as Dave and Drama that have been pulled from its pay-TV service in a dispute with UKTV.

As the increasingly acrimonious dispute enters its third week, the damage from the blackout mounts, with Virgin Media customers looking to defect to rival TV services, and UKTV – which has 10 pay-TV and free channels – losing about £1m a week as channels including Dave record a viewing slump of as much as a fifth.

Freeview, which offers UKTV’s five free channels Dave, Drama, Home, Really and Yesterday, is preparing a TV advert targeting Virgin Media customers that will run as part of its £15m campaign to woo more customers to the free TV service.

Freeview, which has also been mounting a social media campaign aimed at disgruntled Virgin Media customers, is the main TV provider in more than 11m homes.

However, Freeview is available in 19m households because every new TV set sold has a Freeview tuner built into it. Many Virgin Media pay-TV households probably have access to Freeview without realising it.

Since the UKTV channel blackout on 22 July, Freeview’s channel checker, which allows prospective customers to see what they can receive at their address, has had its biggest rise in usage this year. This was followed by web traffic to the company’s “How to set up my Freeview TV” trebling.

“This suggests Virgin Media customers were itching to continue to receive those UKTV channels which had fallen off their service,” a spokesman for Freeview said.

Sky’s sales team have also made a concerted effort to woo unhappy Virgin Media customers on social media, with some staff claiming their best sales days of the year. However, Jeremy Darroch, Sky’s chief executive, said that overall Sky had yet to see a significant increase in new customer signings.

While talks between the two sides continue, UKTV is feeling the pain to the tune of almost £1m per week in the loss of ad revenue and fees from Virgin Media. On the Monday and Tuesday after UKTV’s channels were pulled, the prime-time audience to Dave plummeted 20%, Gold 22% and Eden fell 34%.

ITV used the dispute to pressure Virgin Media in its own negotiations, sending a letter with an ultimatum that it could also pull its channels, which resulted in a deal being struck days later.

Some observers argue that ITV’s opportunistic move to strong-arm a better commercial arrangement from Virgin Media may have cost it funds that may have been used to come to better terms with UKTV.

“The cut in fees that Virgin is seeking to pay UKTV is now partly going to be viewed as a way to fund its new deal with ITV,” one senior TV industry executive said.

Virgin Media is seeking to cut the fees it pays for UKTV’s channels by about 50%, arguing that it needs more video-on-demand rights to BBC shows on the service.

The BBC, which jointly owns UKTV with the pay-TV company Discovery, holds back the video-on-demand rights to shows such as Top Gear and instead sells them separately to rivals including Netflix and Amazon.

Virgin Media, which is not receiving fees from the channels it has temporarily replaced UKTV’s portfolio with, has started a process to potentially auction off the slots to rivals permanently.