CC confirms views in pay-TV movies
2 Aug 2012
The Competition Commission (CC) has decided that Sky’s position in relation to the acquisition and distribution of movies in the first pay window does not adversely affect competition in the pay-TV retail market.
In its final report, the CC has concluded that Sky Movies, which currently offers the first pay movies of all the big Hollywood studios, is not a sufficient driver of subscribers’ choice of pay-TV provider to give Sky such an advantage over its rivals when competing for pay-TV subscribers as to harm competition.
The CC has found that:
- more consumers attach importance to other service attributes, like having access to a broad range of content and to price, than they do to seeing recent movie content;
- the launch of new and improved movie services by Netflix and LOVEFiLM, which reflects an increasing trend of audio-visual content being delivered over the Internet, has increased competition and consumer choice; and
- the recent launch of Sky Movies on Now TV gives consumers for the first time a choice of subscribing to Sky Movies separately from their subscription to other pay-TV content (from whichever provider).
This decision confirms the CC’s revised provisional findings which were published in May this year. The report summary is available here.
The CC has recognized throughout its inquiry that the way people are watching movies is changing and has observed that these changes have been reflected in new services becoming available. Although Sky currently holds the rights to the movies of all six major Hollywood studios in the first subscription pay-TV window (FSPTW), LOVEFiLM and Netflix have already acquired the FSPTW rights of several other studios (responsible for movies such as the Twilight series and the recently-released The Hunger Games) and rights to movies of many of the major studios in subsequent pay-TV windows. The CC expects that, as these rival services increase their subscriber numbers, the barriers to them acquiring further FSPTW rights will continue to fall.
Laura Carstensen, Chairman of the Inquiry Group, said:
'We have seen significant change in pay-TV movie services in the course of our inquiry and have considered the implications of these developments carefully in reaching our final views. It is clear that consumers now have a much greater choice than they had a couple of years ago when our investigation began. LOVEFiLM and Netflix are proving attractive to many consumers, which reinforces our view that consumers care about range and price as well as having access to the recent content of major studios; and the launch of Sky Movies on Now TV, which ends the requirement to buy Sky Movies alongside a basic pay-TV subscription, is a further significant development. Overall, we do not believe that Sky’s position with regard to first pay movie content is driving subscribers’ choice of pay-TV provider.
'In our view, competition in the pay-TV retail market overall remains ineffective but we were asked by Ofcom to look specifically at the role of first pay movie content and Sky’s position with regard to these rights. We have concluded that this content does not provide Sky with such an advantage when competing for pay-TV subscribers as to harm competition and, given this finding, we are not proposing any remedies. We note that, were there to be a material change in the circumstances which have led us to our findings, this might warrant renewed scrutiny of these issues. We also note that Ofcom has sought separately to remedy Sky’s position with regard to sports content.'
Notes for editors
1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.
2. In August 2010, Ofcom announced a decision to refer the supply and acquisition of subscription pay-TV movie rights and the wholesale supply and acquisition of packages including core premium movies channels to the CC for investigation. This reference followed an investigation by Ofcom into the pay-TV market. Under the Enterprise Act 2002, Ofcom can make a market investigation reference to the CC if it has reasonable grounds for suspecting that competition is not working effectively in a market.
3. Also as a result of its investigation into pay TV, Ofcom imposed a ‘wholesale must offer’ remedy with regard to some Sky Sports channels, which was subsequently appealed to the Competition Appeal Tribunal, from which a decision is still awaited.
4. The members of the Movies on Pay TV market investigation Inquiry Group are: Laura Carstensen (Group Chairman), Robin Aaronson, Alexander Johnston, Peter Jones and Stephen Oram.
5. In its investigation, the CC was required to decide whether ‘any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom’. If so, there would be an adverse effect on competition and the CC would have had to decide whether to introduce remedies or to recommend action be taken by others.
6. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.