BSkyB To Lose Movie Exclusivity?

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The UK Competition Commission has published a provisional report in which it says BSkyB’s control of Hollywood film PayTV rights in the UK is stifling competition, with the result that consumers are paying a staggering £50-60 million too much on subscriptions every year.

According to the Commission, BSkyB's contracts with the six major Hollywood studios are a significant problem for competitors such as BT Vision and Virgin Media. For example, it says the price that Sky charges Virgin for its film channels is so high that Virgin cannot run a viable business selling films to its customers.

Laura Carstensen, chairman of the Competition Commission's movies on PayTV investigation, said: "At the heart of the problem is Sky's strong position in the PayTV market, with twice as many subscribers to PayTV 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.”

With Sky spending around £280m a year to secure exclusive Hollywood content, it is in an unassailable position, argues Carstensen: "Recent movie content is important to many PayTV subscribers. As a result, Sky's control of this content enables it to attract more PayTV 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, 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."

Among recommendations, the commission said Sky should be restricted from signing exclusivity deals with all of the major Hollywood film studios for movie rights in the first Pay window. It also recommended that exclusivity deals with Hollywood should be redrawn so rival operators can buy the rights to other distribution channels, including video on demand (VOD).

Sky predictably doesn’t think it has a case to answer. But Virgin Media chief executive Neil Berkett commented: "Virgin Media has long argued that there are deep rooted problems in the pay-TV movies market which have been severely hampering competition. We're pleased that the Competition Commission has provisionally recognised that consumers have suffered harm from Sky's stranglehold and are paying far too much to watch films at home. We hope today's findings will lead to a dramatic transformation of the market and allow new compelling services to flourish that give consumers much greater choice of innovative film services." The Commission will invite views before publishing a decision in August 2012.