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BSkyB’s studio deals threatened by Competition Commission probe

BSkyB could be forced to cut the number of studios it does exclusive movies deals with after a Competition Commission probe found that the pay TV provider’s deals with the majors restrict competition and reduce choice for customers.

Sky has exclusive movie deals with each of the six studios. Last August, the UK communications regulator Ofcom asked the Competition Commission to look at how the News Corp-owned company acquires these films and supplies them to cabler Virgin and other pay TV providers.

In its provisional findings, the Commission said today that Sky’s movie deals adversely affect competition between pay TV operators and in turn negatively impact pay TV subscribers in the UK. It has suggested three possible solutions: restricting the number of studios that Sky can buy movies from; restricting the range of rights Sky can acquire; and forcing Sky to carry other providers’ movie channels and services.

If restrictions were placed on how many studios Sky can have movie deals with, the Commission said it would need to be clear that the movie rights would be picked up by other providers.

“If it could form such an expectation, the CC would need to determine from how many major studios Sky would be permitted to license rights including, at the far end of the spectrum, that Sky be prohibited from licensing rights from any major studios,” the Commission said.

The Commission added that it was inclined to specify which studios Sky could deal with, but rather place a limit on the number. Sky has in the past said that it does not need deals with all of the studios, although this was widely seen as a negotiating ploy to secure the best deals as output agreements came to be renewed.

The Commission said that 22% – or 1 million – of Sky Movies subscribers would leave their pay TV service if they did not have access to Sky Movies. It added that download to own and on-demand services, while gaining in popularity, still account for a fraction of overall movie viewing.

The financial impact of Sky’s dominant position in the pay TV movies market equates to consumers paying £50-60 million a year more than necessary. If the market were to remain unchanged that would rise to £250-£300 million, it added.

Sky issued an official response to the Commission’s preliminary findings and reiterated its position that regulators should not get involved. It said: “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.”