This article was published on May 23, 2012

UK regulator reverses Sky pay-TV advantage decision, following Netflix and Lovefilm growth

UK regulator reverses Sky pay-TV advantage decision, following Netflix and Lovefilm growth
Jamillah Knowles
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Jamillah Knowles

Jamillah is the UK Editor for The Next Web. She's based in London. You can hear her on BBC Radio 5Live's Outriders. Follow on Twitter @jemi Jamillah is the UK Editor for The Next Web. She's based in London. You can hear her on BBC Radio 5Live's Outriders. Follow on Twitter @jemimah_knight or drop a line to [email protected]

UK regulator, the Competition Commission (CC) has published revised findings [PDF] today as part of its Movies on Pay TV investigation. It now finds that Sky Movies no longer provides Sky with a material advantage over its rivals in the pay-TV retail market.

The amendments reflect the growth of services like LoveFilm and Netflix which provide more choice for consumers looking to watch a movie at home.

In a previous version of the CC’s findings it had said that Sky’s market power in the pay-TV retail arena meant that Sky’s control of the acquisition of first subscription pay TV window (FSPTW) movie rights gave rise to it controlling almost all FSPTW movie content in the wholesale market.

The revised report states:

In the light of our more developed evidence base, it now appears to us that we overstated the importance consumers attach to being able to see recent movies on a pay-TV movie service (ie FSPTW content). We still think that FSPTW content is significant to the appeal of Sky Movies, in part because it reflects the emphasis that Sky itself puts on offering recent movies as one of its key differentiating factors.

It also says:

In our view, an effect of the availability of the OTT services of LOVEFiLM and Netflix is to reduce the number of prospective subscribers to traditional pay TV for whom the availability of Sky Movies is a material factor in their choice of provider because consumers of movie services on pay TV now have more choice than they did before.

However, the fact that consumers attach importance to other attributes of pay-TV movie services as well as recency (eg price and the range of content) means, we believe, that another movie service can be a reasonable substitute for Sky Movies on the basis of all attributes taken as a whole.

This appears to be a reprieve for Sky as the market has changed radically with the emergence of many FSPTW services which offer alternatives.

Although Sky holds the rights to movies from all six of the major Hollywood studios, LoveFilm and Netflix have the rights to many other studios including those responsible for films such as the Twilight series and The Hunger Games.

The regulator acknowledged that this is a turn around from its initial and earlier findings in a document on its website, saying:

This is a reversal of the CC’s 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.

The revisions to the provisional findings appear to be a reaction to research into the state of the market today. The investigation started in 2010 and a lot has changed in the way that people get to access and watch movies.

Netflix arrived in the UK earlier this year and sealed a number of content partnerships to appeal to the UK audience. As Netflix entered the UK market, rival LOVEFiLM, also boosted its streaming catalogue, a move that has worked well as its streaming service now does better than its rented DVDs.

Laura Carstensen, Chairman of the Movies on Pay TV market investigation, said:

“…For the purposes of our inquiry, the key effect of the market developments is that, as a result of the new options available to them, consumers’ choice of pay-TV platform can more easily be decoupled from their choice of pay-TV movie service. As a result, Sky Movies no longer provides Sky with the advantage that it used to when competing with other traditional pay-TV platforms, like Virgin Media or BT Vision.

“Given that we no longer find there to be an adverse effect on competition in relation to movies on pay TV, we are not now proposing any remedial action.”

The Competition Commission is publishing these revised provisional findings and is inviting comment upon the latest update. It will then consider those comments before reaching its finaly views. Those wishing to respond to the update have until June 13 2012.

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