Execs often say they hate government regulation, but sing a different tune when officials scrutinize a competitor. That’s why it was so surprising to hear Netflix CEO Reed Hastings say that he wants the UK Competition Commission to keep out of his battle with BSkyB — his most formidable streaming video rival in the market that Netflix entered in January. “We are aiming for a fair fight,” he said at a conference yesterday The Guardian reports. “One of the big advantages is that we are £5.99 (per month), that is a fundamental difference in positioning. Frankly we think many people will get Netflix in addition to (BSkyB’s) Sky Movies or Sky Atlantic.” The Competition Commission has already provisionally determined that BSkyB’s premium TV deals with all of the major Hollywood studios are too restrictive. But last week the regulators said that they would extend their review of the market to July so they could
The government body is expanding on its existing investigation into whether BSkyB’s deals with major Hollywood studios give it too much power in pay TV, The Guardian reports. Regulators have already provisionally determined that those deals are too restrictive and need to be changed to promote competition. But today they said that they would extend their review to July to consider whether the recently launched streaming services there from Netflix and Amazon’s LoveFilm change the business dynamic. BSkyB says it plans to introduce its own Web streaming service called Sky Movies. “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,” the Commission said. Specifically, it asked for comments on whether the Netflix and LoveFilm can be considered a “substitute for traditional pay-TV services and Sky Movies.” It also wants to know whether, with the streaming services in the market, Sky Movies and pay TV are “likely to remain as significant to consumers in choosing their pay-TV retailer.”
ANALYSIS: Referring BSkyB Deal To UK Anti-Trust Regulator A Smooth Move By Scandal-Plagued News Corp
In an extraordinary twist, News Corp has done today what it has spent months trying to prevent, and has forced the UK government to refer its £9 billion deal to buy BSkyB outright to anti-trust regulator the Competition Commission. This will delay the deal for months. But crucially, it means that News Corp does not have to drop its bid entirely.
Jeremy Hunt, the UK culture secretary, had no choice but to stand up in the House of Commons this afternoon and announce he was referring the BSkyB deal to the anti-trust regulator. Hunt said the move would address the “abuses of power” that have dogged the biggest deal of Rupert Murdoch’s career. Hunt may have presented what he was doing as a victory for tough government, but the truth is that’s exactly what the Murdochs now want: They believe they will be cleared of having too much media ownership if they buy BSkyB outright. Europe’s anti-trust regulator has already cleared the deal on competition grounds. News Corp has withdrawn its offer to spin off Sky News as a separate entity. Previously, FCC-equivalent Ofcom said that spinning off Sky News would be enough to swing the deal in its eyes.
Hunt is desperately rowing back from his previously sympathetic attitude towards the BSkyB deal. He has ambitions to be Prime Minister and has finally realized that the mushroom cloud rising over News International, News Corp’s UK newspaper arm, could affect his political ambitions, I’m told. Hunt has written to other regulators, asking them whether they want to reconsider their original go-ahead for the bid. Ofcom still has the ability to scupper the deal if it decides that News Corp is not a fit and proper owner for BSkyB. Since its original advice, press regulator the Press Complaints Commission said it was lied to by News International, James Murdoch has admitted serious wrongdoing and there are allegations of a cover-up stretching back to 2007.
BSkyB shares were down 7.5% this afternoon at 694p per share — well under the 700p per share that News Corp originally offered for the 61% of the pay-TV behemoth it does not already own.
UPDATE: The pay-TV giant could be forced to separate its consumer movie channels and the way it sells those channels to rivals. Ofcom, the communications regulator, has referred Sky’s dominance of the movie pay-TV business to Brussels. The Competition Commission will spend up to 2 years investigating Sky. Separating its consumer movie channels from its wholesale business would be worst case scenario though. What’s at stake are fears that Sky could dominate the coming subscription video-demand movie business the same way it has dominated movie channels for the past decade. Ofcom is concerned that the way Sky sells and distributes movies distorts the market in its favour. “The end result for consumers is less choice, less innovation and higher prices,” says Ofcom.
Virgin Media says: “We’ve long argued that current arrangements for the supply and acquisition of premium movies do not serve consumers well. We’re pleased that these issues are now going to be the subject of further detailed examination by the Competition Commission.”
But Sky slammed Ofcom for yet again seeking to intervene in a sector in which customers are well served. “Further prolonging this unnecessary investigation will only create uncertainty and serve to undermine incentives to invest and innovate, which is bad news for consumers,” BSkyB tells me.
Jonathan Davis, strategy adviser to a number of European public bodies, reminds me that Brussels told incumbent telco BT to separate …