LoveFilm and Netflix are not substitutes for Sky Movies, says UK regulator

LoveFilm and Netflix are not substitutes for Sky Movies, says UK regulator

Following an investigation by the UK’s Competition Commission (Ofcom), into anti-competitive movie deals in the UK, the regulator says that there is no clear evidence that LoveFilm or Netflix have changed BSkyb’s dominance in the market.

In its latest submission to the Competition Commission (formerly known as the Monopolies and Mergers Commission) enquiry into the the UK Pay-TV market, Ofcom says that there is no need to alter the conclusions in its initial findings.

Ofcom had said that Sky’s market power in the pay-TV retail market 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. It found that Sky’s control of the acquisition and distribution of FSPTW movie content on pay-TV affects adversely competition between pay TV retailers.

Ofcom added that it does not think that current services offered by LoveFilm or Netflix are substitutes for Sky Movies.

“While Lovefilm and Netflix have movie rights from some major and non-major studios in the second subscription pay TV window (SSPTW), their rights to FSPTW movie content are dwarfed by those of Sky, which retains control of all FSPTW movie rights from the six major studios.”

The timeliness and content available on Netflix and LoveFilm were also considered as part of the decision. Ofcom said that the services are not pure movies offerings and noted that they both rely on US and UK TV series content, a significant proportion of which is not recent.

The commission feels that the non-premium nature of the services from LoveFilm and Netflix are reflected in their prices (£4.99 per month and £5.99 per month, respectively), which is much cheaper than the pay TV packages which include Sky Movies.

In comparison, Sky’s “Movies Pack”, costs £16 per month on top of the minimum basic subscription (which is currently £20 per month).

It seems that the arrival and expansion of the Netflix and LoveFilm services is having a large enough impact on the market that Ofcom should take a look at it. The commission says,

“While we recognise that in the long-term there is the potential for the OTT SVoD services from LOVEFiLM and Netflix to have a positive impact on competition, the future development of these new services remains uncertain.

LOVEFiLM and Netflix clearly have ambitions in the pay TV retail market, but their ability to compete directly with Sky on a sustainable basis is not certain and critically dependent on access to compelling content which is currently controlled by Sky and likely to remain so.

Therefore, it is unclear that they can be relied upon in the future to address the adverse effect on competition and the resulting detriment to consumers identified by the CC in its Provisional Findings.”

More generally this means more choice for consumers at this stage, but looking ahead as more content becomes available over the internet, there may be more to assess when it comes to the arrival of new providers for television and film on demand.

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