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Ofcom orders Sky to make Sports available to everyone

by Scott Bicheno on 31 March 2010, 09:29

Tags: Ofcom

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The wrong sort of competition

Do you subscribe to Sky and if so was it in order to be able to watch live footie? A lot of people have and it could be argued that sports - especially Premiership football - has been the foundation of Sky's strategy since its inception. By out-bidding all other broadcasters for the footie it has created a compelling reason to pay its monthly fees.

But Ofcom thinks this is unfair and at the conclusion of an investigation into the pay TV market today, it ruled that Sky Sports 1 and 2 have to be made available to other TV suppliers. To rub salt in the wound, Ofcom is even dictating to Sky what wholesale prices it can charge: £10.63 for each channel or £17.14 for both. This represents reductions of 23.4 and 10.5 percent respectively over the current price to cable operators. It also has to offer HD Sports, but can charge what it wants.

"Ofcom has concluded that Sky has market power in the wholesale provision of premium channels," said the press statement. "Ofcom has also concluded that Sky exploits this market power by restricting the distribution of its premium channels to rival pay TV providers.

"This prevents fair and effective competition, reduces consumer choice and holds back innovation and investment by Sky's rivals. Today's decisions are therefore designed to ensure fair and effective competition which should lead to greater investment, innovation and choice for consumers."

Sky, unsurprisingly, is not happy with the ruling. "There should be no doubt that Ofcom's actions represent an unprecedented and unwarranted intervention," said a spokesperson. "This is a marketplace where customers are well served with high levels of choice and innovation. Consumers will not benefit if regulators blunt incentives to invest and take risks. 

"After three years of engagement with Ofcom, we now look forward to a judicial process which will apply impartial analysis and clear legal standards."

Perhaps as compensation to Sky, Ofcom said Sky can go ahead with ‘Picnic' - its plan to make some of its pay TV services available on digital terrestrial TV - as long as its complies with the sports ruling. However, Ofcom is referring Sky to the Competition Commission regarding the video-on-demand market.

While consumers will welcome the ability to access Sky Sports content without having to subscribe to Sky, we can't help feeling Ofcom has extended its remit somewhat here. A perfectly legal business agreement has been struck in which Sky paid a lot of money for some TV rights and now Ofcom is dictating what it can do with them. The biggest losers could end-up being sports clubs as this ruling could make sport a less valuable commodity for Sky in future.

 

HEXUS Forums :: 17 Comments

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Posted by Spud1 - Wed 31 Mar 2010 09:46
Rubbsih :( I can see the benefits to other companies and possibly driving the price down..but I have a moral issue with this and I side with Sky on the same way that I side with Microsoft in their case with the EU. If a company does well in their particular market they should *not* be forced to just give away huge chunks of it..thats just wrong on so many levels. Even more so when its Ofcom who are waving their fingers around..thats not their job is it? Should be the competition commission if it's going to be someone..

Sky should have the right to do what the heck they like with their content - they paid for it and in some cases produced it, and its one of the big things that draws customers to Sky in the first place other than SkyOne.

As far as I see it though, this only applies to Sky Sports 1 and 2? If I were sky, what I would do next is just move the premium and best content away from those channels as fast as possible..create “Sky Sports Premier” or something and sell that at a price that reflects its value. Maybe that would be illegal I don't know but I wouldn't take this lying down (and hopefully they won't either). Most people will likely disagree with me and I know there is a lot of anti-sky feeling on here..but companies should not be penalised for doing well, ugh…add to that the potential loss of revenue for sports clubs since sports will clearly be less valuable to sky one..and its a whole heap of problems.
Posted by dangel - Wed 31 Mar 2010 10:11
I think it's great, and you're missing the point - Sky still get to make shedloads cos they're selling the content, not giving it away. Should one company monopolise sport? Should one company monopolise media content at all (be it news or sport)? I'd argue not.
Posted by marshalex - Wed 31 Mar 2010 10:14
Spud1
Rubbsih :( I can see the benefits to other companies and possibly driving the price down..but I have a moral issue with this and I side with Sky on the same way that I side with Microsoft in their case with the EU. If a company does well in their particular market they should *not* be forced to just give away huge chunks of it..thats just wrong on so many levels. Even more so when its Ofcom who are waving their fingers around..thats not their job is it? Should be the competition commission if it's going to be someone..

Sky should have the right to do what the heck they like with their content - they paid for it and in some cases produced it, and its one of the big things that draws customers to Sky in the first place other than SkyOne.

As far as I see it though, this only applies to Sky Sports 1 and 2? If I were sky, what I would do next is just move the premium and best content away from those channels as fast as possible..create “Sky Sports Premier” or something and sell that at a price that reflects its value. Maybe that would be illegal I don't know but I wouldn't take this lying down (and hopefully they won't either). Most people will likely disagree with me and I know there is a lot of anti-sky feeling on here..but companies should not be penalised for doing well, ugh…add to that the potential loss of revenue for sports clubs since sports will clearly be less valuable to sky one..and its a whole heap of problems.

totally agree with you on that one, why should BT be able to charge less than sky for their channels when sky own all the content on them. yet again its the idiotic regulators trying to take a slice out of the successful companies and force them to share the content thats made them the market leaders in the first place. Its not sky's fault that they pay the most for the rights to sports, if other companies want them then they should stump up and not try and take a free ride off other companies
Posted by Spud1 - Wed 31 Mar 2010 10:25
dangel
I think it's great, and you're missing the point - Sky still get to make shedloads cos they're selling the content, not giving it away. Should one company monopolise sport? Should one company monopolise media content at all (be it news or sport)? I'd argue not.

The don't get to make “shed loads” as you put it - its a massive reduction in revenue from the sale of those channels on the wholesale market, coupled with the double whammy that their competitors will be able to offer the content to their subscribers cheaper, which, in todays price driven consumer markets will cause Sky to lose customers (and therefore more revenue).

Market regulation is a very difficult area as there is a very fine line to be drawn in terms of the government controlling the markets (which is what this heads towards) and preventing total monopoly. In this particular case there is plenty of opportunity for competition from other companies - they *can* buy the content and *can* offer it to their customers if they want to. Customers have the choice and can purchase their sports from either sky or someone else like BT/VM if they so wish. It's not like we're talking about tiny companies here either - VM and BT (who are the two biggest players that have complained here iirc) are both huge corporations who could invent the money into their sports services if they wanted and get in the customers with what sky currently offer..
Posted by eshrules - Wed 31 Mar 2010 10:41
Spud1
The don't get to make “shed loads” as you put it - its a massive reduction in revenue from the sale of those channels on the wholesale market, coupled with the double whammy that their competitors will be able to offer the content to their subscribers cheaper, which, in todays price driven consumer markets will cause Sky to lose customers (and therefore more revenue).

Market regulation is a very difficult area as there is a very fine line to be drawn in terms of the government controlling the markets (which is what this heads towards) and preventing total monopoly. In this particular case there is plenty of opportunity for competition from other companies - they *can* buy the content and *can* offer it to their customers if they want to. Customers have the choice and can purchase their sports from either sky or someone else like BT/VM if they so wish. It's not like we're talking about tiny companies here either - VM and BT (who are the two biggest players that have complained here iirc) are both huge corporations who could invent the money into their sports services if they wanted and get in the customers with what sky currently offer..

If I'm reading right, this is content exclusive to Sky, content Sky have used their size and buying power to outbid other suppliers for.

Ofcom are apparently trying to level the playing field, so to speak. If you allow one company to dominate certain market sectors, you run the risk of allowing a monopoly.

thinking outside the box, although they've trimmed the price of the wholesale, by forcing Sky to resell it to other suppliers, Sky will actually see an increase in revenue as a result.

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