Murdoch: BBC's iPlayer crimps pay TV market

Calls service 'pre-emptive innovation'

LONDON -- It's hardly news when James Murdoch is critical of the BBC -- in fact, it might actually be news if he were not -- but the News Corp. Europe and Asia CEO's most recent comments on the BBC's iPlayer have likely touched a nerve.

In comments made to trade body the Marketing Society on Thursday night, Murdoch said that the BBC's hugely successful seven-day Internet replay service -- which generated 17.2 million downloads last month alone -- is taking a huge chunk out of the British market for download television.

"I'm not saying it's a bad product, but I am saying that it does crowd out competition and innovation," he said, adding that the Internet service is "a big step, a pre-emptive intervention in a marketplace otherwise hugely competitive and moving very fast."

Murdoch, who remains CEO of Britain's biggest pay TV operator, British Sky Broadcasting, went on to accuse BBC governing body the BBC Trust of an "abrogation of responsibility" by allowing the service to go ahead.

IPlayer's impact on the pay TV world is significant, senior execs say.

"What we are seeing is that viewers are going straight to the download service first to see what they have missed on the BBC and watching that instead of looking to see what's on pay TV," one senior exec who declined to be named said. "Pay TV channels are being badly hit."

For the likes of such commercial operators as Virgin Media, Tiscali and BT Vision, the impact will only get worse with the launch of the joint-venture download service Kangaroo later this year, offering a single access point for free and paid content from the BBC, ITV and Channel 4.

But a spokesman for the BBC rejected Murdoch's criticism, saying that the BBC Trust had spent six months analyzing the market impact of iPlayer and had discovered it to be "negligible."