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BSkyB Told to Loosen Grip on Hollywood Studio Pay-TV Deals

Satcaster’s deals with the six majors means rival subscription services are failing to compete.

LONDON – U.K. satcaster BSkyB is facing a call to loosen its pay-TV grip on films made by the Hollywood majors following an investigation by the Competition Commission here.

The Commission said Friday BSkyB’s deals for the first subscription pay-TV window with “the six major Hollywood studios” means other competitors, such as BT and Virgin Media, cannot compete for rights properly.

The industry watchdog noted that while BSkyB does supply its movie channels to “some other pay-TV retailers,” it found that that “has not these retailers to compete effectively with Sky for movie channel subscribers.”

“Due to the importance of being able to see recent movies to many pay-TV subscribers, Sky’s control over the FSPTW movie rights of the major studios, and therefore over the movie channels incorporating this content, contributes to a lack of effective competition in the overall pay-TV retail market," the Competition Commission's report states.

BSkyB’s deals for the first pay window means the satellite provider enjoys exclusivity on an array of high profile Hollywood fair for 15 months. It means output from Universal, Walt Disney, 20th Century Fox, Paramount, Dreamworks and Warner Brothers are on Sky first in the pay-TV window.

Upcoming high profile films to be offered exclusively on Sky include Tron Legacy, Shrek Forever After and Sex and the City 2.

The Competition Commission has invited industry and public reaction to a series of recommendations to help loosen Sky’s grip on the market.

The first recommendation is to restrict Sky from signing exclusive deals with the six majors in the first subscription pay television window.

Loosening the grip would mean rival operators could buy the rights to other distribution methods, including video on demand.

"Sky has had control of recent movie content on pay TV for many years. At the heart of the problem is Sky's strong position in the pay-TV market, with twice as many subscribers to pay TV as all other traditional pay-TV retailers put together. This provides Sky with a great advantage when it comes to bidding for movie rights, which no rival bidder has yet been able to overcome – and, if things stay as they are, we see no likely prospect of change," Competition Commission movies on pay-TV investigation chairperson Laura Carstensen said.

Carstensen also noted that providing new movie releases enabled Sky “to attract more pay-TV subscribers than its rivals and having more subscribers increases further its advantages when bidding in the next round for pay-TV movie rights, and so it goes on.”

Added Carstenen: "Recent movie content is important to many pay-TV subscribers. As a result, Sky's control of this content on pay TV enables it to attract more pay-TV subscribers than its rivals and having more subscribers increases further its advantages when bidding in the next round for pay-TV movie rights, and so it goes on.”

The satellite broadcaster spends north of £250 million ($412 million) per year on buying films, more than its budget for Sky News and other entertainment channels.

Under recommendations put forward by the Competition Commission, BT and Virgin Media would be able to rival Sky Movies by offering their own selection of new releases.

BSkyB issued a statement noting the announcement of provisional findings by the Competition Commission in its movies on pay-TV market investigation.

"BSkyB continues to believe that no regulatory intervention is required and that consumers benefit from high levels of choice, value and innovation across a wide range of providers,” BSkyB said. "We note that the CC's findings remain provisional and have been issued for consultation. We will continue to engage with the CC during the ongoing regulatory process."

The Competition Commission is scheduled to publish a final decisino in August 2012 after consultation on its provisional findings.