UK Regulator Turns Focus on Netflix, Lovefilm

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UK regulator the Competition Commission has widened the scope of its long-running investigation into BSkyB’s subscription film services to include streaming movie services from Netflix and Lovefilm which recently launched into the local market.

As a result the regulator won’t now publish its findings until July (it was due to report in February) to take into account the changes.

BSkyB is being scrutinised for potentially anti-competitive deals for the lucrative first pay-TV window it has struck with six Hollywood majors (Paramount, Disney, Warner Bros, Fox, Sony Pictures, and Universal Studios). In a preliminary report by the Commission last summer the broadcaster was warned that it may need to weaken its grip to permit more competition.

For its part Sky has always contended that with the arrival of new services, consumer choice has been significantly widened and the market has become much more competitive. This, it argues, mitigates the need to break its exclusive contracts with studios.

Jim Bottoms, director & co-founder of Futuresource Consulting, says that the broadening of the investigation comes as no surprise. “Since the investigation started, Lovefilm has clearly improved its competitive positioning through signing content deals for subscription streaming rights providing access to some key titles from local and independent distributors.

“However, for premium movie content from the major Hollywood studios, Sky still retains exclusive rights for subscription VoD in the first Pay TV window.

“A change to the current situation may benefit consumers on one level, through increased competition, but the studio revenues generated from Sky content deals are very important to them at a time when so many other video revenue streams are under threat.”

In a statement, the Commission said: "We recognised in our provisional findings that, were developments in the market to occur, it would be necessary to take them into account before reaching our final views.

"We are considering their implications, alongside other evidence received since the provisional findings, both with regard to our assessment of whether there is an adverse effect on competition (AEC) and for any potential remedies."

The watchdog has called for submissions on a range of questions including to what extent services such as Netflix "substitute for traditional bundled pay-TV services and Sky Movies" and whether new entrants mean that Sky Movies and the first pay-TV window rights "are likely to remain as significant to consumers in choosing their pay-TV retailer."

Netflix launched in the UK and Ireland in January while Amazon-owned Lovefilm has extended its rental-by-post model to offer streaming on-demand.

To counter the threat from OTT rivals, BSkyB intends to launch its own internet service, which will include Sky Movies, which it would operate separately from its TV channel subscription.

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