Regulators at the U.K. Competition Commission have issued a preliminary ruling that BSkyB, which is by far the largest pay-TV operator in the U.K. and 39.1% owned by News Corp., has too much power over the pay-TV movie market in the U.K.
Noting that BSkyB has held exclusive rights for many years to the first subscription pay-TV window and to movies from all six of the major Hollywood studios, the Commission argued that BSkyB's market clout in the pay-TV industry had increased prices and reduced choice and innovation by making it harder for rivals, such as cable operators Virgin Media and IPTV provider BT, to bid for those rights.
If upheld in the final ruling -- expected to be issued in the next year -- the decision could make it easier for Virgin, BT and others to successfully bid for Hollywood movies.
In a summary of its provisional findings, the Commission estimated that "consumers were paying around £50 [million]-£60 million [$82.5 million to $99 million] a year more than would otherwise be the case" as a result of BSkyB's market power, and that "if there were to be no change in the market over the next five years, we estimated that the undiscounted detriment to consumers would be around £250-£300 million," or about $412 million to $495 million.
About one-third of the 15 million pay-TV homes in the U.K. subscribe to Sky Movies.
Laura Carstensen, Chairman of the Movies on pay-TV market investigation, noted in a statement issued with the preliminary ruling that "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."
The Commission also argued that the prices BSkyB charges to Virgin Media to distribute its channels are too high, making it difficult for Virgin to making money on them.
Regulators began the investigation in August 2010. After issuing the preliminary ruling, regulators are now asking for public comment. A final ruling with possible remedies is expected in summer 2012.
In a statement responding to the Competition Commission (CC), BSkyB noted that "BSkyB continues to believe that no regulatory intervention is required and that consumers benefit from high levels of choice, value and innovation across a wide range of providers. We note that the CC's findings remain provisional and have been issued for consultation. We will continue to engage with the CC during the on-going regulatory process."
The Commission's preliminary findings can be found at http://www.competition-commission.org.uk/