Competition Commission Publishes Responses to Pay TV Movies Inquiry

LONDON: Netflix, the British Film Institute (BFI) and a consumer watchdog, among others, have responded to the Competition Commission’s recent ruling that no further action is required to address competition issues in the pay-TV movie market in the U.K.

In May, the Competition Commission (CC) declared that Sky Movies no longer provides the Sky platform with a "material advantage" over its competitors in the pay-TV movie market in the U.K., with Netflix and LOVEFiLM providing consumers with alternatives for renting titles. Reversing an August 2011 ruling, the Commission declared in its findings that no intervention in the market was required.

BFI said it was "extremely concerned that the CC appears to have overturned its previous provisional finding that remedies were required to redress competition issues in the market for movies on pay TV. The reversal of position appears to be based on assumptions about the future growth of very new entrants to the video-on-demand market. Such growth is far from guaranteed, especially in an extremely challenging economic climate such as the U.K. faces at the moment. The BFI believes that consumers are not able to access the optimal range of films, most especially independently produced and distributed films, in the first subscription pay-TV window as a consequence of these competition issues. The BFI believes that the public policy objective of boosting audience choice (upon which it has recently been consulting) will be much harder to deliver in the absence of any intervention."

BFI is urging the Commission "to review its provisional findings: both to reassess its analysis and evidence, and also to take into account more explicitly the wider implications for film beyond the pay-TV window."

Netflix is calling on Ofcom to issue a new investigation, a year after the conclusion of the Commission’s current inquiry, particularly on the issue of first-run pay-TV movie rights. Netflix says that Sky continues to hold a near monopoly on the acquisition of these rights, especially titles from the Hollywood majors. "In Netflix’s view the acquisition of these rights is indeed important, and Sky should not be permitted to continue to monopolise the acquisition of these rights from the studios, and to foreclose access to these rights for its competitors by the conclusion of exclusive licensing arrangements." Netflix says Sky has been able to dominate in the acquisition of these titles because of its "unique ability to leverage the certainty of Sky’s unsurpassed subscriber base and Sky’s ability to bundle Sky Movies with its other channels."

Netflix’s submission goes on to say that it is "irresponsible and dangerous" for the Commission to "simply conclude" that Sky’s competitive advantage in the pay-TV movie market will be "offset by new competition emerging for these rights from Netflix and Lovefilm." As such, it is calling on Ofcom to renew the market investigation in 12 months’ time. "This would allow Ofcom and if necessary, the CC to review whether the emergence of OTT SVOD services in the U.K. has in fact created strong competition for Sky Movies by recruiting subscribers at the retail level, and, in particular whether this has actually resulted in erosion of Sky’s market power as an acquirer of [first run pay-TV] rights."

Consumer Focus, a consumer watchdog, says it is "not convinced that material changes have occurred in the market which would remedy the lack of competition in relation to film rights." Consumer Focus says that Sky still has a monopoly when it comes to first-run movie rights for Hollywood fare, "with LoveFilm and Netflix only succeeding in putting together a bundle of [first-run pay-TV window] rights from non-major studios, plus second subscription pay-TV window, third subscription pay-TV window and library content from both major and non-major studios, and TV programs…. A consumer who wishes to watch the Hollywood blockbusters at home shortly after cinematic release will continue to have no other legal option than purchasing Sky products, which are not subject to competition from other providers."