Ofcom orders Sky to cut wholesale price of sports channels
Wed 31st Mar 2010 | Television & Broadcasting
In what could turn out to be one of the most significant rulings to date, the media regulator Ofcom today ordered BSkyB to reduce the amount it charges rivals to offer Sky Sports by more than 20%.
The ruling states that BSkyB must reduce the wholesale price at which it sells Sky Sports 1 and Sky Sports 2 to rivals such as Virgin Media and BT by 23.4% from the current £13.88 to £10.63 per subscriber per month. On the basis that most subscribers buy packages including the sports channels, the reduction for a bundle is 10.5% from £19.15 to £17.14.
The ruling is effective as of today, but BSkyB has six weeks to make a ‘reference offer’ to the other pay-TV providers. However, it is anticipated that BSkyB will appeal the decision at the Competition Appeal Tribunal.
Ofcom also stated that BSkyB is restricting the distribution of premium movie rights, with a knock-on effect for the subscription video-on-demand market, and is proposing to refer the issue to the Competition Commission.
The ruling is expected to spark a high-profile legal challenge from BSkyB, which is likely to be accompanied by appeals from sports governing bodies, including the Football Association and the England and Wales Cricket Board, who believe that it will irreparably harm their businesses.
Rivals such as BT and Virgin Media have promised to cut the prices that their users pay for Sky Sports channels, but are also concerned that BSkyB may be able to exploit loopholes in the ruling such as shifting key sports content to channels not covered by the ruling.
Ofcom said that it would counter any move by BSkyB if it tried to shift content to channels not covered by the ruling "to any material extent".
"Ofcom recognises that a potential response to the remedy from Sky could be to attempt to undermine it by shifting content onto channels not covered by the remedy," it said. "If Sky was to do this to any material extent, Ofcom would review the remedy and would consider extending it to include the relevant channels."
Last week it emerged that six of the largest sports governing bodies - the Rugby Football Union, the England and Wales Cricket Board, the Professional Golfers' Association, the Football Association, the Premier League and the Rugby Football League - had a written a letter to the Ofcom board warning of "serious consequences" for sport and "irreparable damage" at grass-roots level.
BSkyB says that it spent £944m in sport last year and claims its rights budget will be affected by Ofcom's decision.
"We have designed the remedy to minimise the potential risk of any negative impact on the value of sports rights," said Ofcom. "The wholesale revenue available to Sky to pay for sports rights should not be reduced, and should in fact increase as the market expands."
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