Summary:

Six Hollywood studios have urged the UK’s competition watchdog to throw out its assertion their Sky Movies deals are anti-competitive. But s…

Sky TV remote
photo: AP Images

Six Hollywood studios have urged the UK’s competition watchdog to throw out its assertion their Sky Movies deals are anti-competitive. But some of them are warming to its suggestion BSkyB (NYSE: BSY) should offer rival services like Netflix (NSDQ: NFLX) over its own set top boxes.

The Competition Commission, which has been investigating the UK market for movies on pay-TV, in August provisionally ruled as anti-competitive Sky Movies’ exclusive deals to show the studios’ films in the first pay-TV window (for movies on a subscription basis, including VOD).

The commission proposed a number of remedies, including forcing BSkyB to open its satellite set top box platform to host competing services.

In responses published by the commission today, Disney (NYSE: DIS), 20th Century Fox (NSDQ: NWS), Paramount (NYSE: VIA), Sony (NYSE: SNE) Pictures Television, NBC (NSDQ: CMCSA) Universal and Warner unleash scathing criticism of the commission for failing to properly assess levels of competition in the market, as they see it. Notably, they say the commission has not accounted for the arrival of competing over-the-top services, as has been seen by this week’s Netflix launch.

However, two studios – Paramount and NBC Universal – favour the open-access remedy above others. This “has the best chance of being effective in resolving the competition problem“, according to Paramount. According to NBC Universal: “While this remedy might provide some short-term advantage to OTT providers, it would seem likely to become obsolete through technical and market developments such as those identified by the Commission (internet-enabled TVs and STBs).”

The studios are trying to protect their ability to retain exclusive deals with Sky Movies. Those deals would not be affected by Sky opening its box. That also means the proposal may not succeed in granting better studio deals to Sky’s rivals.

But, though it has started to offer its own on-demand programming to its set top box, BSkyB, at least for now, would rather walk over hot coals than open the box, which is the UK’s dominant pay-TV platform with over 10 million subscribers, as an over-the-top internet TV system.

In its submission, Sky argues “the effect is likely to be marginal” and “it is plain that (this) is not justified on the basis of the evidence and analysis put forward by the competition commission” because “Sky”s Ethernet-enabled set top boxes do not meet the conditions required to be considered to comprise an essential facility to which access should be mandated”.

Sky recently began exploiting its movies rights as VOD through its Anytime+ service on TVs. Previously, it offered on-demand movies via Sky Player (now Sky Go) and via the Sky Anytime portfion of its set top box DVR.

Netflix CEO Reed Hastings this week told paidContent he could bid against Sky Movies for top-tier rights and he doesn’t need to depend on the Competition Commission to do it.

Studios’ Responses: Highlights:

Disney

“A number of conclusions that are simply incorrect.” “Impracticable”, “disproportionate”, “misguided”.

“The provisional findings are predicated on the CC’s view that technological developments will have little or no impact on competition in the pay-TV sector.”

20th Century Fox:

“The CC’s proposed remedies risk ossifying patterns of distribution in the UK at a time when the speed of technological change will produce market-driven
developments.”

“The CC has failed to recognise the significance of one of the most important new forms of content distribution that is likely to affect the UK market: internet distribution.”

“It is striking that when one of the major international players in this area, Netflix, was asked about its intention in the UK it replied that “it had no comment to make” and the CC did not pursue this further.”

Paramount:

“None of the proposed remedies will be effective.”

“The CC must now recognise that the provisional findings as they stand do not provide a robust basis for analysing possible remedies.”

Sony Pictures Television:

“The CC should abandon its provisional view… The CC has not demonstrated … and has failed to take into account quantifiable and foreseeable market developments that
will stimulate competition.”

“The clear implication of investment (from rivals like Lovefilm, Netflix) is that they believe they can compete successfully (without the need for regulatory intervention).

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