Ofcom says there is no clear evidence that Lovefilm or Netflix will be able to mount a competitive challenge against Sky Movies.
In its latest submission to the Competition Commission enquiry into the UK pay-TV market, the regulator says there is no need for the Commission to alter the conclusions made in its Provisional Findings.
The Commission had said that Sky’s market power in the pay-TV retail market had given rise to barriers to the acquisition of first subscription pay-TV window (FSPTW) movie rights. It found that Sky’s control of the acquisition and distribution of FSPTW movie content on pay-TV affects adversely competition between pay-TV retailers.
“While Lovefilm and Netflix have movie rights from some major and non-major studios in the second subscription pay-TV window (SSPTW), their rights to FSPTW movie content are dwarfed by those of Sky, which retains control of all FSPTW movie rights from the six major studios,” said the Ofcom submission.
It added that the Lovefilm and Netflix services relied heavily on US and UK TV services to the extent that they were akin to a general entertainment channel service. This was backed up by the pricing, £4.99 (€6.08) per month for Lovefilm and £5.99 per month for Netflix, compared to £16 per month for the Sky “Movies Pack” on top of the basic £20 per month subscription.
Sky’s response to its new competitors, the pay-as-you-go Now TV, was likened by Ofcom to the aborted pay-DTT service Picnic, which it said may also be intended to encourage consumers to take up the full DTH offering.