Sky: Movie inquiry failed to consider Netflix

11.02 Europe/London, December 7, 2011 By Julian Clover

BSkyB has said the Competition Commission inquiry into pay-TV movie rights had failed to consider the impact of competition from new internet distributors such as Lovefilm and Netflix.

“It is plain that the three “barriers” to the acquisition of FSPTW [first subscription pay-TV window] movie rights it identifies do not apply to these types of operators. Both Amazon Lovefilm [sic] and Netflix have successfully competed for pay TV movie rights in the UK and elsewhere, including FSPTW rights, and there is no good reason to believe that their ambitions are confined to acquiring rights from non-major studios, as they have to date in the UK. Having proper regard to the ability of internet distributors to compete for FSPTW rights is sufficient to undermine entirely the CC’s preliminary conclusion that “barriers to the acquisition of sufficient FSPTW movie rights to be able to create a movie product which can compete effectively with Sky’s movie products” constitutes a “market feature” capable of giving rise to an AEC,” Sky said in its submission.
Playing down its own success, Sky said that research among pay-TV subscribers consistently indicate that movies cause less than 10% of subscribers to take out a subscription. “Even if Sky’s wholesale terms of supply of those channels placed Virgin Media at a competitive disadvantage in competing for pay TV subscribers (which they do not), the proportion of subscribers whom Virgin Media could not, as a result, compete effectively to serve is too small for that alleged disadvantage to have a material impact on competition in the UK pay TV market.”
In its own submission the cablenet welcomed the findings, saying that competitors to Sky have been unable to provide a competitive constraint on Sky in relation to the supply of FSPTW movie content in circumstances in which there are material barriers to the acquisition of that content directly from the Major Studios.
The Commission has proposed that BSkyB face a limit on the number of exclusive movie rights it is allowed to hold from the major Hollywood studios. Provisional findings by the Competition Commission found Sky’s control over pay-TV movie rights in the UK to be restricting competition between pay-TV providers, leading to higher prices and reduced choice and innovation for subscribers.
Sky also faces “must retail” measures requiring it to acquire on a wholesale basis and offer to its subscribers any movie channel containing first subscription pay-TV window (FSPTW) movie content. The remedy is similar to that already imposed on Sky following the earlier pay-TV review by the regulator Ofcom.