BSkyB making “excessive profits” from movies

BSkyB could be forced to lower the wholesale prices it charges broadcasters to show its 10 film channels because the Competition Commission says it is consistently making “excessive profits” from its movie service.

The Commission says Sky Movies, which has exclusive deals with six of the biggest Hollywood studios, consistently earned profits that could not be justified by investment risks taken in the 1990s on its exclusive film studio contracts.

The Competition Commission’s findings were published in a preliminary working paper investigating concerns that BSkyB is distorting competition for premium movies in the pay-TV market. The next step in its antitrust probe will be to publish its provisional findings, estimated for April.

The Commission adds: “Although Sky has taken significant risks in the past, its most risky investments were many years ago and achieved short payback periods. Therefore, it appears to us that Sky’s excess profits can no longer be explained by the risk of its earlier investments.”

Sky says it stands by its record of bringing “choice and innovation” to UK consumers

A spokesman adds: “We believe that Sky’s profitability today reflects its past investments and its success in delivering highly valued products to customers. The Competition Commision’s movies investigation is at a preliminary stage and we will respond to its working papers as the process continues.”

Last year, in a similar probe by the Commission into sport programming competition, BSkyB was forced to reduce the wholesale price it charges other broadcasters for its sport channels.

Rupert Murdoch’s NewsCorp is currently trying to buy the 61% of BSkyB it does not already own. Culture secretary Jeremy Hunt could refer the bid to the Competition Commission – although he has given the company extra time to address concerns surrounding media plurality.

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