Sky could be forced to loosen grip on Pay TV rights in UK

“The findings of the Competition Commission should be broadly welcomed, although coming from the independent sector, I can’t help but being struck by how the entire release refers to Hollywood studios and their output, ” commented Stephen Kelliher, head of sales and marketing at Bankside Films and currently chair of export organisation FEUK.

The Commission provisionally found that Sky’s control over pay-TV rights in the UK is “restricting competition between pay-TV providers, leading to higher prices and reduced choice and innovation for subscribers.” (See full report here.)

One dramatic potential “remedy” the CC has floated is “restricting the number of major studios from which Sky may license exclusive the first subscription pay-TV window rights (FSPTW.)”

Other remedies include “restricting the nature of the exclusive FSPTW rights which Sky can license from the major studios (eg so that rights for distribution methods such as subscription video on demand could be made available to other providers), and requiring “Sky to acquire on a wholesale basis and offer to its subscribers any movie channel containing FSPTW movie content created by a rival.”

Some observers believe there could be an upside for the UK’s independent sector should Sky’s exclusive control of FSPTW rights to movies from the six Hollywood major studios be ended. The CC has pointed out that due to the “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.”

If there are more outlets and more competition for the rights to premium Hollywood films, runs the argument, space should open up for the indies too.

“How are audiences going to develop broader tastes if the independent sector is pushed to one side or ignored?” Kelliher asked. “We would like to see greater choice for audiences through greater programming of independent films.”

Writing in a blog on the Sky Corporate Website, Ian Lewis (Director Sky Movies) has strongly disputed the CC provisional findings. “I struggle to understand how anyone can think the supply of movies today is anything other than vibrant and dynamic,” Lewis commented.

The Sky Movies boss has also drawn attention to the increasing number of platforms and devices through which viewers can access film. Citing iTunes, Xbox, BT Vision, and Sony PlayStation, Lewis argued that market forces are already delivering “opportunity and choice” in the Pay-TV arena.

“And of course there’s more innovation on its way: we wait to see how Tesco supercharges Blinkbox, how Amazon will develop LoveFilm’s ambitions, and how Netflix tries to replicate the success it’s enjoyed in the US in the UK. These are big consumer brands who believe that they can develop even more successful businesses through movies distribution.”

The Competition Commission’s full “Provisional Findings” report was published earlier this week, andtThe Commission is now asking for responses to its findings and proposed remedies.

“You can never predict these things but I think it’s fairly sure we’re going to hear back from BSkyB,” a CC spokesperson commented. “One would imagine that we are going to hear back from the other interested parties which is people like BT, Virgin, and obviously also people like LoveFilm and other potential or existing competitors. I should imagine that he we’ll probably hear back from the major studios as well.”

There is no restriction on who can respond. Once the responses are received (by mid September), there will be another round of formal hearings, to be held in private during the early autumn.

The proposed timetable is then for the publication of “The Provisional Decision on Remedies,” in November/December. There will then be one last chance for comment prior to the final report stage, scheduled for February 2012.

The Commission has “determinative” powers. That means it can compel parties to take actions if it deems them necessary.