Ofcom Decision in the Pay-TV Market
06 April 2010
What has happened?
It was announced on 31 March that Ofcom will require BSkyB (Sky) to offer at a wholesale level its Sky Sports 1 and 2 channels at a price determined by Ofcom. This will provide a mechanism for other platform providers to gain access to Sky Sports 1 and 2 on fair and reasonable terms. The decision will mean, subject to appeals, the wholesale price Sky charges for Sky Sports 1 and 2, to platforms such as Virgin Media or BT, will be reduced by around 10%.
Additionally, Ofcom is proposing to ask the Competition Commission to consider whether there are any competition concerns in the provision of Hollywood first run movies.
Who will the decision affect?
It will most notably affect some of the companies (BT, Top Up TV and Virgin Media) that originally made submissions to Ofcom complaining about Sky’s behaviour back in 2007. The decision has been viewed by Sky’s competitors as a victory against a company that they believe – and Ofcom agrees – to have market power in the wholesale distribution and retailing of its Sky Sports channels. Subject to any appeal by Sky, Sky’s competitors will now be able to buy Sky Sports 1 and 2 from Sky at a price set by Ofcom.
Rights holders, especially those who have received large revenues from Sky for their broadcasting rights, are understandably concerned that their largest income source may contract quite significantly. Sky argues it will not be incentivised to pay millions of pounds for exclusive rights if other platform providers can simply purchase the programmes made by Sky using these rights at knock-down prices.
Unsurprisingly Sky believes competition in the pay-TV market is healthy, consumers are paying a fair price for a product they value and that Virgin, BT and others are being rewarded by Ofcom despite their lack of domestic sporting investment, while Sky has invested billions of pounds into UK sport.
What is the significance for the wider Broadcasting Community?
Ofcom’s decision may cause ripples of consternation through the wider broadcasting market too. Some may see this as an isolated case of a targeted market intervention yet could this be the beginning of a more hands-on approach from Ofcom in ensuring, among other things, fair and effective competition?
If you are interested in any of the above issues, feel free to email any of us (or the Field Fisher Waterhouse person with whom you usually deal) with your views, comments or questions on this topical and contentious subject.