Sky chief: Ofcom 'unlawful'

From Colin Mann in Cannes

Jeremy Darroch, Chief Executive of BSkyB, delivered a robust defence of the satellite operator's business model and role in content value, as well as a strong attack on regulatory intervention in a Media Mastermind keynote speech at MIPTV.

Identifying three key threats to the economics of content – piracy, commoditisation and regulatory intervention, Darroch said that content owners should be able to generate a fair and profitable return on their investment – £1.7 billion (E1.92bn) for 2010 in Sky's case – which would impact on the ability to maintain the “virtuous circle' of investment and monetisation.

He described the three threats as “forces working in the opposite direction,” suggesting that piracy had changed significantly with the ubiquity of broadband. “Online piracy is theft pure and simple,” he stated. “It's not a victimless crime.” In terms of commoditisation, he warned of other players retailing content at the lowest cost possible and making up margins elsewhere on other products. “Players will need to think carefully about their approach to distribution in the future.”

Darroch reserved his harshest criticism for regulators, referring obliquely to UK comms watchdog Ofcom's recent pay-TV review. “There is a regulatory agenda to move value from one part of the value chain to another and improve chances for a competitor. This is unprecedented and unwarranted.” He said that Sky had a strong reason to believe this was unlawful and confirmed that the company was preparing a legal challenge. “This should sound alarm bells across the industry,” he said, suggesting instead that Ofcom needed to make content retailing a more attractive model. He said Ofcom has formed its view despite it being contrary to that of experts with years of experience in TV rights.

Describing the threat of market distortion from regulatory intervention, Darroch observed that Sky wasn't afraid to invest, and welcomed competition, but that Ofcom's approach cast dark shadows over the value of content.

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