Joseph O'Halloran ©RapidTVNews | 19-08-2011

In yet another blow to the Murdoch media empire, the UK Competition Commission (CC) has provisionally found that Sky’s control over pay-TV movie rights in the UK is restricting competition between providers.

The CC believes that Sky’s strategy of maintaining a tight grip on the rights to the movies of all six major Hollywood studios in the first subscription pay-TV window (FSPTW) has ultimately resulted in higher prices and reduced choice and innovation for subscribers.

The provisional findings make the case that due principally to the incumbency advantage Sky has in the form of its large base of subscribers, would-be rivals are unable to bid successfully against Sky for these rights.

Even it accepts that though Sky supplies its movie channels (Sky Movies) to some other pay-TV retailers, the CC has provisionally found that this supply has not enabled these retailers to compete effectively with Sky for movie channel subscribers.

Damningly, the CC alleges that due to the importance of being able to see recent movies to many pay-TV subscribers, Sky’s control over the FSPTW movie rights of the major studios, and therefore over the movie channels incorporating this content, contributes to a lack of effective competition in the overall pay-TV retail market. It believes that many consumers do not consider the other ways of watching movies as close substitutes to Sky Movies, which is confirmed by the value attached to the FSPTW rights of the major studios by Sky and the studios.

Furthermore, despite being aware of some significant developments taking place in the market, the CC says that it has not seen evidence that these are likely to diminish Sky’s bidding advantages to any meaningful degree in the foreseeable future.

Commented Laura Carstensen, Chairman of the Movies on pay-TV market investigation: “Sky has had control of recent movie content on pay-TV for many years. At the heart of the problem is Sky’s strong position in the pay-TV market, with twice as many subscribers to pay-TV as all other traditional pay-TV retailers put together. This provides Sky with a great advantage when it comes to bidding for movie rights, which no rival bidder has yet been able to overcome—and, if things stay as they are, we see no likely prospect of change.”

Replying to the charges, BSkyB said that it did not believe that any regulatory intervention into the FSPTW industry was required and that consumers in the UK were benefiting from high levels of choice, value and innovation across a wide range of providers. It invited people to assess the summary submission it made to the CC to see its full case.

The CC is today inviting responses to its provisional findings and consulting on measures to make the market more competitive and the principal possible remedies on which the CC would like to invite views are 1. restricting the number of major studios from which Sky may license exclusive FSPTW rights; restricting the nature of the exclusive FSPTW rights which Sky can license from the major studios; and/or ‘must retail’ measures requiring Sky to acquire on a wholesale basis and offer to its subscribers any movie channel containing FSPTW movie content created by a rival.