David Prosser: Sky's future is not quite so bright
Saturday 27 June 2009
Outlook: Sky is not a company for which people often feel too sorry.
But it's hard not to have some sympathy for the broadcaster, as Ofcom tries to force it to sell more premium content. After all, Sky invented the UK pay TV market 20 years ago, took all the risk in turning it into a profitable concern and, having established it as just that, is now being told it must share the spoils with rivals.
Those rivals, led by BT, claim that Sky is more or less refusing to sell any of the content in which it invests so heavily – spending around £1.3bn a year on sport and film rights – so that viewers who want to see such stuff have no choice but to invest in a Sky subscription.
Nonsense, says Sky, which says it will do a deal with anyone on content if the terms are right, but that having made such a large bet on pay TV, it isn't simply going to give the stuff away now the gamble has proved to be a winning one.
Ofcom takes BT's side, concluding yesterday that Sky is not serious about negotiating wholesale deals; that its ambition to drive sales of its platform is so all-consuming that it makes it almost impossible for rival platform providers to buy any of its premium content. The regulator says it has evidence to prove just that.
The question, then, is having spent 20 years establishing this market, should Sky be forced to help its competitors? Equally, should Ofcom allow Sky to retain the power to make or break its rivals in perpetuity – if that's bad news for consumer choice and product innovation – as it almost certainly is?
With that debate in mind, from Sky's perspective at least, the collapse of Setanta UK could not have come at a worse moment. While the Irish company's problem was a different one to the wholesale issue addressed by Ofcom yesterday, its demise will fuel the perception that Sky is too powerful.
It is at least worth noting the speed with which ESPN, the Disney-owned sports broadcaster, stepped in to pick up Setanta's rights to Premier League football. It, for one, doesn't appear to be intimidated by Sky's current market strength. But practically speaking, it's unrealistic to expect a broadcaster starting from scratch to outbid Sky for future content, in sports or elsewhere.
If there's no hope of competition on content rights, and Ofcom's evidence on Sky's reluctance to embrace wholesale distribution is really so compelling, it has little choice but to step in. Sky will no doubt challenge the watchdog at every turn, but it has had this market to itself for some time. Ofcom, in any case, points out it could make £250m a year from new wholesale deals, which would help with any loss of subscription income.
Watch this space: this is going to be quite a fight. And you won't even have to pay Box Office to watch it.
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