The early-2012 arrival of Netflix appears to be enough to allow BSkyB to escape having to reduce its domination of the UK pay-TV movie market.
The UK’s Competition Commission last week reversed its earlier position that BSkyB’s dominance was choking competition, although there is still time for it to change its mind again before a final ruling in August. The Commission originally stated, in August 2011, that BSkyB’s control over film rights was restricting competition between pay-TV providers, leading to “higher prices and reduced choice for subscribers.”
The Commission then decreed that “first-window” deals with Hollywood’s six leading studios were anti-competitive and estimated that BSkyB’s domination cost UK consumers in total an extra £50 million to 60 million per year. It then considered compelling Sky to relinquish some of these deals to open the first window to others.
But, BSkyB appealed on the grounds that the then-impending arrival in the UK of Netflix, along with the growing strength of existing players such as Amazon’s LoveFilm DVD and online rental service, meant that there was healthy competition in the UK pay-TV movie market. The Competition Commission, in its interim ruling last week, has now accepted Sky’s argument and so reversed its earlier position. The Commission had expanded its definition of the UK pay-TV market to include the new online providers rather than just pay-TV operators Virgin Media and BT Vision, which were ineffective competitors to Sky as far as premium movies were concerned.
This about-face was naturally welcomed by Sky itself, although it is a two-edged sword in the sense that it means there is now increasingly effective competition and its dominance is likely to be eroded by the market rather than by the regulator. There are already signs of that, as although Sky still has exclusive deals with the “Big Six” Hollywood studios for the UK, both Netflix and LoveFilm have made inroads into the UK TV movie market. Netflix has struck exclusive deals with Sony, Warner and Lions Gate, and as a result Netflix now has first-window rights to popular movies such as the “Twilight” series and “The Hunger Games.” It has also acquired UK second-window rights from some of the big six.
Virgin Media and BT Vision both criticized the Competition Commission’s change of position, arguing that competition in the UK pay-TV movie market was still ineffective. Of course, in doing so, they basically admitted their own failure to make any impact in the market.