Competition Commission performs Sky Movies U-turn

The UK Competition Commission has changed its position on Sky Movies and now says the channel’s movie agreements do not provide the Sky pay TV platform with a material advantage over its rivals in the pay TV retail market.

The Commission, which is investigating whether Sky Movies has a dominant position in the market, had said the opposite in an earlier ruling. It is now proposing that no remedial action is needed to remedy competition issues in the UK pay TV movie market.

The emergence of Netflix, Lovefilm and other alternatives to Sky Movies were responsible for the U-turn. The Commission said that it expects the range of services available to consumers to continue to grow with, among other launches, the roll out of Sky’s Now TV service, which will give access to Sky Movies without the need to subscribe to a wider package. 
The Commission said in a statement: “This is a reversal of the original provisional finding published in August 2011 but reflects the evidence now available. In particular, Netflix launched in the UK in January 2012 and, since the original provisional findings, Lovefilm has enhanced significantly its Internet-distributed movie offering.”

Sky has movie output deals with each of the six Hollywood majors, giving it their titles in the first subscription pay TV window (FSPTW) in the UK. The Commission noted that Netflix and Lovefilm have also concluded deals with a smaller range of studios for content in the same window. “The [Commission] has found that, as rival services increase the number of their subscribers, the barriers to them acquiring further FSPTW rights will continue to fall,” it noted.

Competition between providers of movie services on pay TV has changed materially and, as a result of these changes, consumers now have much greater choice. LoveFilm and Netflix offer services which are attractive to many consumers and they appear sufficiently well resourced to be in a position to improve the range and quality of their content further,” said Laura Carstensen, chairman of the Movies on Pay TV market investigation.

She added: “Despite these developments, which are good for competition and good for consumers, we still believe that competition in the pay TV retail market overall is ineffective. However, the scope of our investigation is limited by the terms of the reference to us to the impact of FSPTW movies and, in our view, Sky’s position with respect to FSPTW movies does not provide Sky with a material advantage over its rivals in the pay TV retail market.”

The revised provisional findings now enter a consultation process ahead of the Commission publishing its final views.