19 Aug, 2011

CC: says Sky is restricting competition in pay-TV film.

The Competition Commission (CC) has provisionally found that Sky’s control over pay-TV movie rights in the UK is restricting competition between pay-TV providers, leading to higher prices and reduced choice and innovation for subscribers.

Sky has for many years held exclusively in the rights to the movies of all six major Hollywood studios in the first subscription pay-TV window (FSPTW). In a summary of its provisional findings published today (19th August), the CC has provisionally found that, due principally to the incumbency advantage Sky has in the form of its larger base of subscribers, would-be rivals are unable to bid successfully against Sky for these rights. Although 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.

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 market. 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.

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

The CC is today inviting responses to its provisional findings and consulting on measures to make the market more competitive.

Laura Carstensen, Chairman of the Movies of pay-TV market investigation, said: “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.

“Recent movie content is important to many pay-TV subscribers. As a result, Sky’s control of this content on pay-TV enables it to attract more pay-TV subscribers than its rivals and having more subscribers increases further its advantages when bidding in the next round for pay-TV movie rights, and so it goes on.

“We have found that, as a result of this lack of effective competition, subscribers to Sky Movies are paying more than they otherwise would, and there is less innovation and choice than we would expect in a market with more effective competition.

“We have considered carefully how technology is changing the options available to consumers and the ways in which many firms are now seeking to offer consumers internet-distributed movie services. We have observed several significant developments taking place in the market at the moment. However, we have found no evidence to date that any of these alternative providers of movie products are likely to affect significantly Sky’s ability to secure the first pay-window rights of the major studios in the foreseeable future – though we will continue to monitor developments in this area through to our final report, which we expect to publish early next year.

“On the basis of our findings, we would like to encourage greater competition by enabling more firms to secure the pay-TV rights of the major studios so as to be able to offer movie fans new choices in competition with Sky’s movie offerings.”

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