Virgin Media to distribute Sky movies

October 17, 2011

Virgin Media, the UK’s leading cable operator, is now distributing movie content from its arch rival BSkyB, following pressure from the Competition Commission and UK regulator Ofcom. The two operators dominate the UK’s pay TV market, with BSkyB having 10 million customers for its satellite service and Virgin Media 4 million for cable. While Virgin Media is chiefly a distributor, BSkyB is also a content rights holder and has had exclusive UK deals with the major Hollywood studios NBC Universal, Viacom, Fox, Disney, Sony and Time Warner. It is this arrangement that has been subject to scrutiny by Ofcom, which asked the Competition Commission to investigate whether this was stifling development and diversity in the UK pay TV market. Ofcom was particularly concerned that BskyB’s exclusive holding of movie rights would give it excessive control over the emerging OTT (Over The Top) market.

The Competition Commission then announced in February 2011 that BSkyB was charging excessive wholesale prices for movies to its rivals, especially Virgin Media but also hybrid terrestrial/IPTV operator BT Vision, which has about 500,000 customers. Following that, BSkyB has reluctantly decided to allow Virgin Media customers access to its Sky Movies Collection of 500 movie titles. These will be offered to Virgin Media customers for no extra charge, alongside its other movie content sources including FilmFlex, PictureBox and Virgin Media Player. Furthermore, while Virgin Media already offers Sky’s live sports channels for a premium subscription, all its customers can now access sporting highlights available from the Sky Sports Collection.

The deal highlights the conflicts that arise when a pay TV operator is also a major rights holder, and is likely to change BSkyB’s arrangements with the movie studios. In the future, BSkyB may not seek to negotiate expensive exclusive arrangements if it is compelled to make the resulting content available to rivals at wholesale prices set in effect by the regulator.

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