24 Aug 2011
What now for Sky as the Competition Commission provisionally finds against it?
Rosemary Choueka who is Head of EU, Competition & Regulation at Lawrence Graham LLP:
"The Competition Commission has provisionally found that Sky's control over pay-TV movie rights in the UK restricts competition between pay-TV providers. Given Sky's pre-eminent position in pay-TV in the UK, it is perhaps surprising that this issue has only just been tackled by the competition authorities.
"The CC is currently consulting on a number of possible remedies. The three main solutions it is looking at are as follows:
Restricting the number of major studios from which Sky may license exclusive rights to show movies on its pay-TV platform
The CC is considering whether the major studios (ie the six largest) would license those rights to other pay-TV companies if they could not license them to Sky. It is also considering how many major studios Sky should retain the right to contract with and whether it should specify those studios. This might be quite a clumsy remedy, depending on how the studios are selected, and could be difficult to square with the studios themselves.
Restricting the range of exclusive rights which Sky may license from those studios
In the alternative, the CC is looking to restrict the technology/platforms in respect of which Sky might license exclusive rights from the major studios and/or restrict Sky from licensing both linear and video on demand movie rights exclusively from the studios. This would allow others to bid for the rights not licensed by Sky. Again, the CC will have to consider whether the studios would license those rights to others if they could not license them to Sky. It is also considering whether it would need to specify which rights Sky could not hold or whether Sky should be allowed to choose. This remedy is slightly neater than the first, but it may be the case that innovation in technology means that differences between platforms evaporate in the near future. Also it is not clear whether linear television has a future, or whether video (or television) on demand will become the sole way of watching.
Requiring Sky to acquire on a wholesale basis and market to its customers products incorporating movie content created by other parties
The CC describes this as "must retail" measures. The aim of this remedy is to reduce the risks faced by companies bidding for pay-TV movie rights by increasing the size of their potential customer base. It is considering the various ways in which this sort of remedy might be designed.
"The CC has also invited comment on whether a combination of any of these remedies might be appropriate, together with comment on certain supplementary technical measures. Responses are due by 9 September. It is not yet clear which, if any, of the remedies the CC favours.
"Ian Lewis, director of Sky Movies, has commented that "it's worth taking the time to consider whether regulatory intervention is really something that is required in this rapidly evolving marketplace." Whilst he is correct that technological developments change the landscape quickly, there is no doubt that Sky has a unique position in pay-TV, which is not in itself rapidly evolving. Free competition has not curbed this, so it may well be that regulatory intervention really is needed."