Share out your best stuff, Ofcom tells Sky

The regulator thinks BSkyB should be forced to wholesale its premium content to other broadcasters.

Last Updated: 31 Aug 2010

The good folk at Ofcom will be off BSkyB’s Christmas card list this year: the regulator is proposing that the satellite broadcaster should be forced to re-sell its premium sports and film content to other broadcasters, in the interests of greater competition. Not surprisingly, Sky’s a little miffed that Ofcom wants to undermine its entire business model, and has promised to use ‘all available legal avenues’ to fight the proposal. With Ofcom’s final report due out later this year (which will be legally binding), this looks like another bonanza for the lawyers...

Ofcom’s basic argument is that it’s unfair for Sky to hog all the best stuff – particularly when it comes to ‘live top-flight sport and first-run Hollywood movies’. So customers would be better served if this content was available more widely – and that means forcing Sky to make these channels available to rival broadcasters on a wholesale basis. Sky does this to some extent already (to Virgin Media, notably) but Ofcom is now talking about ‘a range of regulated prices’. In other words, the regulator will tell Sky how much it can charge – and since it seems to think that Sky’s already making too much money out of this stuff because of its market dominance, we suspect their respective valuations are unlikely to tally (or even be on the same page).

Sky’s commercial rivals are obviously delighted about the idea, with BT’s Gavin Patterson telling the BBC that prices could fall ‘if Ofcom breaks Sky’s stranglehold’. And it is true that customers have relatively little choice if they want to watch premium sports content, particularly after the recent demise of Setanta – and no competition means no pressure on prices. Ofcom adds that the move would help the development of ‘innovative distribution channels’ (whatever that means). And the collapse of Setanta does illustrate how hard it is for new entrants to take on BSkyB (and its powerfully entrenched market position) without some kind of leg-up.

On the other hand, Sky will argue that Ofcom’s intervention would unfairly distort the market and totally undermine its business model – which is based on paying big sums of money for premium content and using that as a way to entice more subscribers. If its content is available via other broadcasters, why are people going to bother signing up to Sky? And if people don’t sign up, it won’t be able to justify shelling out for the content in the first place.

So there are arguments both ways – which presumably means that lawyers on both sides are in for a busy few months...

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