Summary:

The UK inquiry in to whether Sky Movies’ exclusive first-run subscription VOD deals with six major Hollywood major studios is anti-competiti…

Reed Hastings Happy

The UK inquiry in to whether Sky Movies’ exclusive first-run subscription VOD deals with six major Hollywood major studios is anti-competitive will belatedly widen to consider internet services from Netflix (NSDQ: NFLX), Lovefilm and Sky itself.

The Competition Commission had already preliminarily ruled Sky’s position anti-competitive and proposed a number of remedies, including forcing Sky to carry rivals like Netflix and Blinkbox on its own TV set top box.

Now it has changed the goalposts ahead of a final conclusion, by deciding to also consider the recently-launched over-the-top internet movie services (announcement). That makes escaping without charge more likely for Sky, which had for months protested to the commission that such new services mitigate against its own domination.

Despite the arrival in the marketplace this Q1 of Netflix and Lovefilm Instant, which have signed deals with minor studios, most Hollywood studios still exclusively license first-run S-VOD to Sky Movies. But Netflix’s hubris, if it can be believed, may give the Competition Commission reason to believe this situation is not set in stone…

We could just bid against them (Sky),” CEO Reed Hastings told paidContent when launching in the UK in January.

“We are not dependent on whatever the Competition Commission does.”

If Hastings was being straight, that no longer sounds like a monopolistic market. If Netflix can out-bid Sky Movies for Hollywood, the commission would be hard-pressed to find the situation anti-competitive.

But BSkyB (NYSE: BSY) is rich, Netflix is already incurring massive losses on internationalisation and Hastings may just have been talking the talk – after all, such talk is a long way from Netflix’s admitted “moneyball” strategy of scooping up low-grade rights.

Lovefilm and Netflix already hold first-run S-VOD rights from one major studio, Paramount (NYSE: VIA), for Germany, the U.S. and Canada, suggesting the problem may not be insurmountable. Or the arrival of Netflix and Lovefilm may only succeed in pushing up the prices Sky Movies must pay studios in a bidding war.

BSkyB is also due to make Sky Movies available to those without Sky’s satellite service over internet TVs, game consoles and tablets this summer, on both a subscription and pay-per-view basis.

This inquiry relates only to subscription first-run movies. That is a model on which Netflix and Lovefilm Instant are, perhaps unwisely, going toe-to-toe with Sky, as well as with each other.

But another model may also make competition more likely – pay-per-view. Others like Blinkbox and Filmflex look well-positioned with simple propositions that take individual movies to consumers for individual fees without the need for a subscription. It is a model in which Hollywood rights are easier to come by. Sky also holds PPV movie rights, exploited through its Sky Movies Box Office brand, which it will also bring to its internet TV service.

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