Commission to probe U.K. pay TV movie market

Current situation gives Sky ability to distort competition

LONDON – In a move that will dismay both Hollywood studios and Europe's biggest movie buyer BSkyB alike, Britain's media watchdog Ofcom said Wednesday that it has referred its inquiry into the first run pay TV movie market to antitrust regulator the Competition Commission.

The move means that the Commission will broaden the terms of Ofcom's inquiry and now look at potentially changing the rules under which such movies can be sold, in a review that could drag on for as long as two years.

In particular it has asked the Commission to look at both the way that first run movie rights are sold as packages, as well as the supply of premium movie channels to rival pay TV platforms.

The inquiry may also look at the way that VOD rights are bundled with pay TV broadcast rights, giving Sky rights to both, an arrangement that is worth hundreds of millions to Hollywood studios.

"It's about exclusivity," said one senior studio sales head. "That's where the premium pricing comes from. If the two are split and we have to sell them separately, the price we charge for our movies will come right down."

But the regulator believes that by setting up such deals, Sky has a stranglehold on competition.

"Ofcom is concerned in particular that the way in which these movies are sold and distributed creates a situation in which Sky has the incentive and ability to distort competition. The end result for consumers is less choice, less innovation and higher prices," it said in a statement.

"Ofcom cannot address these concerns fully using its powers and has referred them to the Competition Commission."