Netflix Urges Further U.K. Review of BSkyB's Dominance in Pay TV Movies

BSkyB Satellite - Sign - 2010
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The British Film Institute also expresses concern over the Competition Commission's recent finding that BSkyB has no material advantage amid the rise of streaming video services.

Netflix and the British Film Institute have asked the U.K. Competition Commission to reconsider its recently stated view that British pay TV giant BSkyB doesn't have a dominant position in the area of movies on pay TV anymore.
Their opinions are part of comments filed by industry players on the state of movie content on U.K. pay TV, which are now published on the commission's web site.

The filings came after the Competition Commission last month found in a provisionary report that BSkyB no longer has a material advantage over competitors in terms of its pay TV movie offerings amid the rise of streaming video providers Lovefilm, owned by, and Netflix. It also signaled that it would no longer suggest regulatory action on this issue. The report marked a reversal of its original findings last year.

The agency has looked at BSkyB, because it holds film rights from the six major Hollywood studios in the first subscription pay TV window. This led competitors and critics to argue that the company, in which Rupert Murdoch's News Corp. has a 39 percent stake, has too much market power.

The commission mentioned that Lovefilm and Netflix have in many cases acquired rights to films from other studios and the big six studios in subsequent pay TV release windows.

Netflix in its submission said it is competing against BSkyB for content, but none of the incumbent’s competitors currently have meaningful access to films in early subscription TV windows. "Sky should not be permitted to continue to monopolize the acquisition of these rights from the studios and to foreclose access to these rights for its competitors by the conclusion of exclusive licensing arrangements," it said.

Netflix urged the CC to recommend that U.K. TV regulator Ofcom conduct "twelve months following the conclusion of this investigation a further pay TV order to determine whether the market for the acquisition of these rights should be referred back to the CC for renewed investigation." It added: "Netflix believes that the need to anticipate such a further review results from Sky’s market power as both a pay TV retailer and acquirer of [first pay TV window] rights, combined with the inherent uncertainty around the extent to which the entry of new over-the-top subscription VOD providers, such as Netflix, will in fact effectively challenge Sky’s longstanding market power in the U.K."

Netflix CEO Reed Hastings earlier this year said "we’re focused on winning some of the big movies deals from Sky," but said the company isn't dependent on the CC review.

The British Film Institute in a filing also said that it is “extremely concerned” about the Competition Commission’s reversal, urging it to reconsider its position.

“The Competition Commission’s decisions are based on the impact of two recent entrants to the VOD market, Lovefilm and Netflix, and on Now TV, Sky’s own over-the-top service, which has not yet launched,” it said. “The impact of these new services is very small, and it cannot be argued that they have had any substantial impact on the market for movies on pay TV."

It added: "Lovefilm and Netflix have active subscriber levels that are far lower than those of Sky, and their future prospects are highly uncertain.”

Meanwhile, BSkyB welcomed the revised provisional findings and argued that "Now TV will make a further contribution to the already high level of choice of ways to watch movies available to U.K. consumers."

NBCUniversal said in a filing that it "supports the Competition Commission's revision of its provisional findings and fully agrees with the views expressed both as to the absence of any concern in the upstream rights market and its ultimate conclusion that Sky's position with respect to the acquisition and distribution of first...window movie content on pay TV does not adversely affect competition between pay TV retailers."

It added though: "NBCUniversal would urge the Commission to reconsider its approach in relation to market definition and the expected pace and scale of change within the industry when finalizing its conclusions as to the effectiveness of competition in the pay TV retail market."

And Viacom's Paramount studio in a brief filing said it "commends both the CC’s evidence-led approach to the revision of its earlier findings and the conclusions."

Twitter: @georgszalai