BSkyB Gets Reprieve On Movie Business After Netflix Debut
05/23/2012| 03:14am US/Eastern
--BSkyB won't have to alter movies business
--Regulator says Netflix debut weakens BSkyB's dominance
--Virgin Media says it strongly disagreees
(Adds Virgin Media comment from the seventh paragraph.)
By Max Colchester and Lilly Vitorovich
The U.K.'s competition regulator said Wednesday that British Sky Broadcasting Group PLC (>> British Sky Broadcasting Group plc) won't have to alter its movies business as the pay-television operator's stranglehold on newly-released films has been weakened by the arrival of U.S.-based Internet movie service company Netflix Inc. (NFLX).
The Competition Commission launched an investigation into BSkyB's dominance in the U.K pay-TV movie market in 2010. In a preliminary finding last August, it concluded a lack of competition meant subscribers to Sky Movies were paying more than they should be.
However, in a revised opinion published Wednesday, the watchdog said that Netflix's arrival in the U.K. and Ireland in January led U.K.-based online-video rival Lovefilm, a unit of Amazon.com Inc. (>> Amazon.com, Inc.), to cut its prices to entice customers and boost competition in the sector. The commission also changed its stance on the importance that consumers attach to watching the latest movie releases, concluding that customers actually want to access a large range of cheap films.
"Competition between providers of movie services on pay TV has changed materially and, as a result of these changes, consumers now have much greater choice," said Laura Carstensen, Chairman of the Movies on Pay TV market investigation. The competition watchdog said it would not be launching any action follow the publication of its revised opinion. Nevertheless, Carstensen said that competition in the pay-TV retail market overall is "ineffective."
In a statement, BSkyB said it noted the findings of the investigation and would continue to engage with the Competition Commission.
In its preliminary findings last year in August, the Competition Commission said it was looking to change the way BSkyB operates its Sky Movies business to allow rivals such as Virgin Media Inc. (>> Virgin Media Inc.) and BT Group PLC's (BT.A.LN) BT Vision to compete on a more equal footing. At the time, the regulator said would-be rivals were unable to bid successfully against BSkyB for the rights to show movies from all six major Hollywood studios in the first subscription pay-TV window because BSkyB's large base of subscribers gave it a financial advantage. On Wednesday the competition watchdog said that Netflix and Lovefilm had already acquired the rights to several movies and that barriers to entry would continue to fall as they gain in scale.
In a statement, Virgin Media said it strongly disagrees with the provisional findings by the Competition Commission, stating that Netflix and Lovefilm have done little to impact Sky's grip on the market.
"Sky's control of movie rights is restricting competition in the U.K., leading to higher prices, reduced choice and less innovation," a Virgin Media spokesman said.
BSkyB counts News Corp.'s (NWS) as its biggest shareholder with a 39.1% stake. News Corp. also owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal.
-By Lilly Vitorovich, Dow Jones Newswires; 44-20-7842-9290; firstname.lastname@example.org; Twitter: @LillyVitorovich