UPDATED: Premier League challenges Ofcom ruling against Sky
Updated 15.04.10
The Premier League is to contest the decision by regulator Ofcom to make Sky sell its sports channels to rival broadcasters at a discount of up to 23 per cent over the current wholesale price.
Premier League boss Richard Scudamore says the league has "no other option".
He says the move has "consequences for UK sport and UK sports fans that are too serious and fundamental for us to ignore".
"By forcing Sky to sell its sports channels to its competitors at a discount, Ofcom will reduce the incentive of all broadcasters, Sky included, to invest in the acqusition of sports rights," adds Scudamore.
In response, Ofcom said in a statement: "It's in consumers' interests for our pay TV decisions to come into effect as soon as possible to deliver the benefits of wider choice and innovation. We are happy to defend our position wherever necessary."
Published 31.03.10
Regulator Ofcom has, as expected, today told Sky it must cut the price it charges rival cable, terrestrial and internet broadcasters to show its premium sports channels.
The broadcaster will have to sell Sky Sports 1 and 2 for up to 23 per cent less than the current wholesale price.
The decision comes after a three-year inquiry into the pay-TV market. Sky says it will appeal against the "unwarranted intervention", arguing it could be to the detriment of consumers.
"Consumers will not benefit if regulators blunt incentives to invest and take risks," says the satellite TV company.
Sky will have to sell Sky Sports 1 and 2 for £10.63 a month each – 23.4 per cent less than the current price. Bodies representing rugby, football and cricket – which rely on lucrative TV rights deals – fear the proposals will mean less money going into sport.
However, if Sky implements the price cuts, it will be allowed to offer pay-TV services on Freeview, replacing Sky's current free channels. The move could mean Freeview-only homes having access to premium sport such as the Premier League for the first time.
Ofcom also found that Sky's dominance in the supply of premium movies restricts viewer choice, but says it does not have the power to address the problem. It has suggested referring the issue to the Competition Commission.
Published 22.03.10
TV viewers could soon be paying less to watch Premier League football and other sports as Ofcom forces BSkyB to cut the price it charges other broadcasters for its Sky Sports channel this week.
Rivals including BT Vision and Virgin Media are expected to mount a price war against Sky when the new rules come into force. The price cuts should be in force in time for the next season.
BT has hinted that it would charge just £15 for sports programming and that some of its high-value customers could get Sky Sports free if they sign up to BT Vision, according to the MediaGuardian.
Other internet service providers such as TalkTalk, which owns Tiscali TV, will also be able to offer cheaper Sky Sports prgramming in the biggest shake-up of the pay-TV market for 20 years.
Ofcom's pay-TV review has taken three years. Last summer, in its initial report, Ofcom decided Sky must be forced to wholesale its premium channels, dropping the price of Sky Sports 1 and Sky Sports 2 from the £13.48 it currently charges Virgin Media to within the range of £9.42 and £11.24 per channel.
A bundle of both channels and Sky Movies – which currently costs Virgin £23.40 per subscriber – should come down to between £16.98 and £20.43.
It's likely Sky will mount a legal challenge to the ruling.
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Comments
Presumably Offcom has looked at the price Sky pays for rights, and worked out what that costs on a "per subscriber" basis (both direct, and indirect (i.e. via Virgin etc.)), and added a "fair margin" for profit - essentially calculating a "fair wholesale price".
The current Sky wholesale price is presumably in excess of the "fair wholesale price" so they've been told to reduce the wholesale price charged.
On the basis this applies to the current deal in place with the Premier League (and other sports providers), which cannot be renegotiated, the Premier League has no real interest in the Offcom ruling. The argument "but it might make Sky offer less in the future if Sky decides to re-bid for Premier League rights" is too remote as it applies to a future bid, which Sky may or may not make for TV rights which will not be subject to this particular ruling - i.e. Sky can jack up prices in the future (and perhaps, but perhaps not, be subject to another Offcom ruling).
While I am not happy with the amount of money Sky charges and would certainly benefit from price reductions in any upcoming "price wars," I cannot agree with this decision. Sky has invested an enormous amount of money into not only the acquisition of rights for top sporting events, but also into the highest quality premium delivery of the programming. All you need to do is view sports programming in other countries to see that Sky's broadcasts are leaps and bounds beyond what anyone else is producing. I don't understand why it isn't reasonable that they reap the rewards of this investment. After all it isn't as though Sky is prohibiting other broadcasters from re-broadcasting their channels through exclusivity, it is merely charging a premium price for a premium service. For those who think sky is too expensive, you have the choice to not pay for their services. I, for one, do subscribe to their services and will be very upset if the production ends up taking any sort of hit as a result of this type of meddling. Economics is about supply and demand, Sky are providing what we demand, I really don't think the price they ask for it is unreasonable. Sure I would prefer to live in a free content Utopia, but that is not the real world.
I agree, I think they will actually bag more business because of this, I for one will purchase SkySports 1 & 2 from BT if this ruling stands, otherwise I will find other means to find the football via free internet streaming websites than pay Sky.
This is GREAT news :)
Sky has been ''at it'' now for far toooo long with their prices.
Their pricing for the likes of their football channels are obscene given that it's only now and then that a 'top game' comes around yet you have to pay for a full months viewing at a time (at least)