UK communications regulator Ofcom has asked the Competition Commission to investigate the sale and distribution of pay-TV movies, citing concerns that the way the market is currently structured allows and encourages BSkyB to distort competition.
Ofcom is concerned in particular that the way in which these movies are sold and distributed creates a situation in which Sky has the incentive and ability to distort competition,Â the regulator noted. ÂThe end result for consumers is less choice, less innovation and higher prices.Â
Ofcom added that its powers are not adequate to address the issue fully, which is why it has been referred to the Competition Commission.
The regulatory and competition probe will address the rights deals between News Corp-backed BSkyB and the Hollywood studios and, separately, the wholesaling of SkyÂs movie channels to third parties. The pay-TV operator was recently forced to wholesale its sports channels to third parties on more agreeable terms, prompting several of its rivals to offer new sports packages comprising the channels in question.
Ofcom said it has identified Âa number of featuresÂ that reduce competition regarding movie rights and movie channel distribution. Specifically, it said the features of the market that distort competition include the current release windows, the joint licensing of linear and SVOD rights and exclusivity of deals.
It added that limited exploitation of SVOD movie rights, restricted distribution of SkyÂs premium movie channels and the high prices levied for these channels as evidence that the market is being distorted.
Ofcom said its preference was for a commercial solution to the issue, but that its discussions with the Hollywood majors suggested that a change in the way they negotiate and conclude movie rights deals was unlikely.
The pay-TV movies investigation follows on from OfcomÂs wider investigation into the UK pay-TV market, which was prompted by a complaint from Sky competitors BT, Setanta, Top Up TV and Virgin Media.
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