BSkyB accused of pushing up prices

Satellite broadcaster BSkyB was accused today of pushing up prices for consumers in the UK through its dominance of premium pay-TV movies.

The fears have prompted British watchdog Ofcom to refer studio sales of movie rights to subscription channels and the wholesaling of films to other broadcasters to the Competition Commission as part of its three-year probe into pay-TV.

The regulator says the way in which the movies are distributed and sold “creates a situation in which Sky has the incentive and ability to distort competition”.

“The end result for consumers is less choice, less innovation and higher prices,” Ofcom added.

The company – which was forced to lower wholesale prices on sports channels in March – may have to cut film prices to rivals such as BT and Virgin as well, if the concerns are upheld.

An estimated half of Sky’s 9.8 million customers subscribe to its movie channels, which the regulator said were a “key factor for many consumers” when signing up to pay-TV.

But Ofcom has concerns over a limited pool of films coming out of the six major Hollywood studios and the staggered way in which rights are sold, limiting new entrants. Sky’s strong position as a distributor also gives it more leverage with studios, it claims.

Although rivals can compete against Sky for the rights to pay-per-view movies, Sky has an exclusive tie-up with the studios for the first run of movies to subscribers – a stage Ofcom puts more weight on due to the convenience of not paying for each movie.

The regulator is also concerned over the studios’ selling of subscription video-on-demand (SVoD) rights for films alongside the rights to air movies on conventional subscription channels.

It said the current set-up “has resulted in a situation in which Sky has control of premium movie rights”.

“We are concerned that Sky will maintain and exploit its market power by restricting the distribution of its movies channels and exploitation of SVoD rights,” Ofcom warned.

Ofcom suggests the commission could seek to change the way in which key premium movie rights are bought and sold to make the process more competitive.

The commission could also require Sky to grant wholesale access to movie content on “regulated terms” – signalling lower wholesale prices for rivals.

A Sky spokesman said of today’s referral: “Ofcom is yet again seeking to intervene in a sector in which consumers are being well served.

“There have never been so many ways to access movies with innovation stretching across a wide variety of channels and platforms, including multiple ways to access Sky Movies.

“Further prolonging this unnecessary investigation will only create uncertainty and serve to undermine incentives to invest and innovate, which is bad news for consumers.”