EU probes Sky TV's Hollywood contracts

The EU is investigating whether contracts European pay-TV stations signed with Hollywood studios contain clauses meant to shut out competition and inflate film prices.

European Commission spokeswoman Amelia Torres said letters were sent to Hollywood studios and inspections carried out at the offices of pay-TV companies in Europe last year. She declined to name any of the companies involved, saying the probe was at a preliminary stage.

However, British Sky Broadcasting confirmed EU antitrust regulators have requested information from it regarding film deals with Hollywood studios.

BSkyB has deals with all the main Hollywood studios and shows around 2,000 film titles a year on its pay-TV channels.

Other pay-TV companies in Europe had no immediate comment.

Walt Disney Television (International) told the Financial Times it also had been contacted by the Commission, but denied it was engaged in any exclusive or anti-competitive deals.

The probe began after the EU had its attention drawn to lengthy contracts between one European pay-TV company and several Hollywood studios, Torres said, refusing to be more specific.

The EU’s chief antitrust enforcer, Mario Monti, has publicly expressed his concern that “very long-term,” exclusive contracts for rights to films and sporting events, which are vital to the commercial success of pay-TV channels, could violate EU rules if they close off the market to new entrants.

Following on from that inquiry, the Commission learned of another clause used in such contracts under which the TV company agrees to extend the best price and terms for a set number of films for one Hollywood studio to all studios it has contracts with.

“The Commission is concerned that such a clause might lessen competition between the Hollywood studios and, therefore, keep film prices artificially high in Europe,” Torres said.

The Commission has already forced changes in the way European football leagues sell game rights to television, and could do something similar if it finds the movie contracts violate competition laws.

Lawyers said the Commission had a difficult road ahead of it.

“It’s a very tricky area as owners of unique content are always open to charges of abuse,” said Johnathan Barrett at Teather and Greenwood in London.

However, anything that reduces the studios’ bargaining power would be of long-term benefit to pay-TV operators like BSkyB, which has already said it may not renew its contracts with all Hollywood studios, he added.