BSkyB fights back against UK Competition Commission

Hollywood studios have joined forces with BSkyB to lambast the UK Competition Commission’s latest proposal that the pay TV operator should be restricted in the number of studios it can have exclusive deals with for first-run rights. This follows the Commission’s first suggestion in Nov. 2011 that BSkyB should be forced to give rival Over The Top (OTT) providers access to all customers of its subscription VOD service Sky Anytime Plus via its set top box.

Most of the leading studios, including Paramount, NBC Universal and Warner Bros, have backed BSkyB’s assertion that the ruling is absurd and based on an outdated assessment of the UK OTT market. All these parties expressed incredulity that the Commission should have come up with a second round of proposals to restrict Sky’s ability to deal with the studios before having even responded properly to their complaints regarding alleged unfairness of the first ones. Some insiders have suggested it is part of a general vendetta against BSkyB in the UK, in the wake of the recent phone hacking scandal involving newspapers owned by News Corporation, which is the operator’s largest shareholder with 39 percent.

The argument is that although BSkyB is indeed dominant in pay TV with almost 70 percent of the market, it now faces substantial and fast-growing competition in the OTT arena with the entry this month of Netflix, set to be followed in February by the new YouView platform supported by all leading broadcasters including the BBC and ITV, alongside incumbent Telco BT as well as digital terrestrial infrastructure provider Arqiva and triple play operator Talk Talk.

The studios also mostly supported BSkyB’s objection to the Competition’s Commission’s ruling that it should open up its set top boxes to OTT competitors so that the latter could supply their services that way to BSkyB’s customers. The Commission’s argument here is that so many people in the UK have BSkyB set top boxes that it presents an obstacle to competition by reducing the incentive for these people to buy other boxes. BSkyB’s retort is that people no longer need a new box to access OTT content since it can come from so many sources apart from its set top boxes, including web connected TVs, games consoles, Blu-ray players, tablets and smart phones.

Both NBC Universal and Warner Bros. are supporting Sky, arguing that while opening up BSkyB’s boxes might provide some short-term benefits to both customers and OTT providers, events were moving so fast that it would quickly become obsolete and not worth the disruption for BSkyB. Indeed, YouView will be launching its set top box next month, providing access to a vast array of broadcast content.

There is some truth in both points of view. BSkyB and the studios are right that OTT competition in the UK is quickly heating up. But, BSkyB is still dominant in terms of subscribers at present, and so the Competition believes competitors need a little leg up into the market if they are to present a serious alternative.