Darroch: Regulatory intervention will distort market

By Robert Briel
April 14, 2010 11.05 UK

MIPTV 2010 – CANNES. Sky CEO Jeremy Darroch has described the outcome of Ofcom’s Pay-TV Review as “an unprecedented and unwarranted intervention”. In a wide-ranging speech to the MIPTV programming market in Cannes, Darroch said the regulator’s actions represented an aggressive attack on the value of content. Ofcom plans to regulate the supply Sky’s premium movie and sports channels by introducing a wholesale ratecard and making them available to all comers.

“What the regulator is seeking to do here is, in essence, to promote investment in new delivery platforms. Those platforms will be operated by businesses with little interest in investing in content themselves.” Darroch said Ofcom had decided to make content retailing a more attractive business, but in doing so would squeeze the margins on the riskier and more expensive business of content creation.

The UK continues to support a vibrant set of basic channels that have benefitted from being sold alongside premium movies and sports. As household penetration grows, those channels would look to increase their investment in original UK content, a move that according to Darroch Ofcom’s proposals could now undermine. “You have to question whether the new delivery platforms will want to offer a basic tier of channels at all. That’s a legitimate choice for them to make. But if Ofcom’s actions skew the marketplace in their favour, the damage could extend to those basic channels and the UK viewer would be all the poorer for it.”

Sky is planning increased investment over the next 12 months that includes both drama and the arts.

Underlining that Sky was prepared to work with regulators for the greater good, Darroch warned of the illegal downloading that was now becoming normal practice. He said that piracy could not be allowed to weaken the business case for content investment. “At Sky, we’re acutely aware of the responsibility that comes with licensing valuable content from our partners. That’s why we have always sought to maintain the security of our satellite platform and why we’ve been active in working with Government and industry to tackle online piracy”.

As an ISP and a content owner, Darroch said Sky could see the argument from both sides, and it was obvious that rights owners and ISPs had to work together. “Unfortunately, in the UK, not all ISPs were prepared to play ball, which is why, in the end, the Government had to legislate.”

The legislation, part of the Digital Economy Bill, was passed last week. However, ISPs that include Talk Talk have already expressed their dissatisfaction with the outcome