Advanced Television

Ofcom wants to regulate movies too; refers to Competition Commission

August 13, 2010

The hail of regulator references and appeals continues in the UK as Ofcom asks the Competition Commission to investigate its concerns regarding the sale and distribution of pay TV movies.

Ofcom thinks the way in which first-run Hollywood movies are sold and distributed creates a situation in which Sky has the incentive and ability to distort competition. The end result for consumers, it alleges, is less choice, innovation and higher prices.

Ofcom, which has conducted its own review of pay TV, said it cannot address these concerns fully using its powers and has referred them to the Competition Commission.  The referral relates to two specific movie markets. The first concerns the rights sold by the major Hollywood studios to broadcast films for the first time on pay TV.  And the second concerns the wholesale supply of pay TV packages containing movie channels, which are based on those rights.

Ofcom believes the deals Sky does in these markets have number of features that, in combination, may reduce competition.  The Competition Commission has a maximum of two years to investigate and reach a decision on the concerns raised by Ofcom.

Ofcom is also concerned that Sky will have the ability to dominate the subscription video-on-demand market for premium film when it launches such services. “In the longer term we are concerned that as Sky develops its subscription video-on-demand services, its current market power in relation to linear channels could be transferred across to these new services,” the regulator said.

The Competition Commission said “Ofcom analysis has identified that within these two markets there are a number of features that, in combination, may reduce competition,” the media regulator said.

Sky reacted: “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.”

Virgin Media said: “We have long argued that current arrangements for the supply and acquisition of premium movies do not serve consumers well. We are pleased that these issues are now going to be the subject of further detailed examination by the Competition Commission.”

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