Ofcom has today asked the Competition Commission to investigate concerns regarding the sale and distribution of subscription premium Pay TV movies.
First-run Hollywood movies are particularly important to competition in the Pay TV sector. This is because they are highly attractive to a large number of consumers, who want subscription access to premium high quality movies as close to their box office release as possible. This content is a key factor for many consumers when signing up to a pay TV service.
Ofcom is concerned in particular that the way in which these movies are sold and distributed creates a situation in which Sky has the incentive and ability to distort competition. The end result for consumers is less choice, less innovation and higher prices.
Ofcom cannot address these concerns fully using its powers and has referred them to the Competition Commission.
The referral relates to two specific movies markets. The first concerns the rights to movies sold by the major Hollywood studios to broadcast films for the first time on pay TV.
And the second concerns the wholesale supply of pay TV packages containing movies channels, which are based on those rights.
Ofcom analysis has identified that within these two markets there are a number of features that, in combination, may reduce competition.
The Competition Commission has a maximum of two years to investigate and reach a decision on the concerns raised by Ofcom.
Ofcom began its investigation in March 2007 into the pay TV market after receiving a submission from BT, Setanta, Top Up TV and Virgin Media.
Ofcom undertook extensive analysis and conducted three public consultations. In March 2010, Ofcom published the conclusion of its investigation into the pay TV market. This included a wholesale must offer remedy for Sky Sports 1 and 2.
At the same time, Ofcom consulted on its proposed decision to make a reference to the Competition Commission to address concerns regarding movies rights and the wholesale supply of movies channels.
Copies of the full statements and of the statement published today can be found here: http://stakeholders.ofcom.org.uk/consultations/movies_reference/statement/