Sky faces being stripped of tie-up deals with major movie studios

BSkyB risks losing its grip on the rights for premium pay-TV movies after competition officials yesterday challenged the broadcaster's stranglehold on Hollywood films.

The Competition Commission said the group's exclusive deals with six of the big studios over the rights to films when they are first shown on television restricted competition and meant higher prices and reduced choice and innovation for viewers.

BT and Virgin Media have led calls for the way the market is structured to be changed to allow them greater access.

In its provisional findings following a year-long inquiry, the commission said it may end up restricting the number of studios that BSkyB can sign exclusive deals with and also the nature of the rights it can sign, so that services such as video on demand can be provided by other suppliers. It may also require Sky to offer any movie channel run by another group to its own subscribers on a wholesale basis.

Laura Carstensen, chairman of the investigation, said: "Sky has had control of recent movie content on pay TV for many years. At the heart of the problem is Sky's strong position in the pay-TV market, with twice as many subscribers to pay TV as all other traditional pay-TV retailers put together.

"This provides Sky with a great advantage when it comes to bidding for movie rights, which no rival bidder has yet been able to overcome - and, if things stay as they are, we see no likely prospect of change."

BSkyB noted the provisional ruling and said: "BSkyB continues to believe that no regulatory intervention is required and that consumers benefit from high levels of choice, value and innovation across a wide range of providers."

About one third of the UK's 15 million pay-TV viewers subscribe to Sky Movies.

The commission noted new developments in the market such as broadband internet distribution, but concluded that none of these alternative sources were likely to affect Sky's ability to get first-view rights for major films in the foreseeable future.

Last year, a review into the pay-TV market by telecoms regulator Ofcom forced BskyB to lower the prices it charges rivals for showing sports events.

The regulator was also worried about the premium pay-TV movie market but passed its inquiry on to the Competition Commission as it said it did not have the power to address its concerns.

The final deadline for the report is 3 August next year, but the commission said it expects to make its ruling before then.

Analysts said the announcement was negative for BSkyB but not a real surprise. The ultimate outcome may be similar to the unwinding of Sky's exclusive rights to show Premiership football, put in place last April, noted Patrick Yau at brokerage Peel Hunt.

"Movies and sport are the key reasons subscribers come to Sky, so this will be a blow to the business," he said.

The Competition Commission said the group's exclusive deals with six of the big studios over the rights to films when they are first shown on television restricted competition and meant higher prices and reduced choice and innovation for viewers.

BT and Virgin Media have led calls for the way the market is structured to be changed to allow them greater access.

In its provisional findings following a year-long inquiry, the commission said it may end up restricting the number of studios that BSkyB can sign exclusive deals with and also the nature of the rights it can sign, so that services such as video on demand can be provided by other suppliers. It may also require Sky to offer any movie channel run by another group to its own subscribers on a wholesale basis.

Laura Carstensen, chairman of the investigation, said: "Sky has had control of recent movie content on pay TV for many years. At the heart of the problem is Sky's strong position in the pay-TV market, with twice as many subscribers to pay TV as all other traditional pay-TV retailers put together.

"This provides Sky with a great advantage when it comes to bidding for movie rights, which no rival bidder has yet been able to overcome - and, if things stay as they are, we see no likely prospect of change."

BSkyB noted the provisional ruling and said: "BSkyB continues to believe that no regulatory intervention is required and that consumers benefit from high levels of choice, value and innovation across a wide range of providers."

About one third of the UK's 15 million pay-TV viewers subscribe to Sky Movies.

The commission noted new developments in the market such as broadband internet distribution, but concluded that none of these alternative sources were likely to affect Sky's ability to get first-view rights for major films in the foreseeable future.

Last year, a review into the pay-TV market by telecoms regulator Ofcom forced BskyB to lower the prices it charges rivals for showing sports events.

The regulator was also worried about the premium pay-TV movie market but passed its inquiry on to the Competition Commission as it said it did not have the power to address its concerns.

The final deadline for the report is 3 August next year, but the commission said it expects to make its ruling before then.

Analysts said the announcement was negative for BSkyB but not a real surprise. The ultimate outcome may be similar to the unwinding of Sky's exclusive rights to show Premiership football, put in place last April, noted Patrick Yau at brokerage Peel Hunt.

"Movies and sport are the key reasons subscribers come to Sky, so this will be a blow to the business," he said.

Sky faces being stripped of tie-up deals with major movie studios

BSkyB risks losing its grip on the rights for premium pay-TV movies after competition officials yesterday challenged the broadcaster's stranglehold on Hollywood films.