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and Virgin Media) that originally made submissions to Ofcom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.