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Sky’s sports rights dominance could harm competition, says Ofcom

UK media regulator Ofcom has said Sky’s dominance of the UK pay-television sports rights market could harm competition, but stated it is “less clear” that an obligation to share content with other broadcasters should be extended to its rival, telecommunications company BT.

Ofcom today (Friday) published a consultation as part of its review of the pay-television ‘wholesale must-offer’ remedy. The review will determine whether regulation requiring Sky to offer its Sky Sports 1 and 2 channels to other pay-television providers to ensure fair and effective competition in the UK’s pay-television sector remains appropriate.

In 2010, Ofcom imposed an obligation requiring Sky to offer to wholesale Sky Sports 1 and 2 at prices set by Ofcom. The obligation has been in effect since 2010 for Virgin Media (cable television) and BT (digital terrestrial television) while litigation has been on-going. In November, it was extended to IPTV for BT.

Ofcom today said there have been significant developments in the market since its 2010 review. These include wider availability of sports content on competing retail services, more ‘over-the-top’ content providers and new devices on which consumers can access pay-television. The regulator also noted that BT has acquired key sports rights and entered the market as a ‘vertically integrated’ provider of sports channels and as a pay-television retailer.

Ofcom’s assessment indicates that English Premier League and Uefa Champions League football are “key content” likely to be capable of influencing consumers’ choice of pay-television retailer. Therefore, Ofcom is consulting on its view that limited distribution of this content may harm competition between pay-television retailers.

Ofcom said Sky currently holds over 75 per cent of live rights to Premier League football and has more than 80 per cent of market revenues from the supply of key sports channels. The regulator added: “The content Sky has is likely to influence the purchasing decisions of a sizeable proportion of high-value customers. Retailers that do not have access to this content would find it more difficult to compete for these customers.

“Given Sky’s continued strong market position, Ofcom is seeking views on its assessment that if there was limited distribution by Sky of its key sports content, competition between pay TV retailers may be harmed. Ofcom is also seeking views on whether, given its market position, Sky may have incentives to limit distribution of its key sports content.”

Referring to BT, Ofcom said it holds around 25 per cent of live Premier League rights, generating between 10 per cent and 20 per cent of revenues, but has acquired all live rights to Champions League football from the 2015-16 season.

The regulator added: “BT may also have incentives to limit distribution of its key sports content. But given the amount of content rights it currently holds and its market position, it is less clear that limiting distribution of its sports channels would harm competition. Ofcom is seeking views on this assessment.”

Today’s statement from Ofcom comes after the Premier League last week outlined the parameters of its next rights cycle by revealing that 168 matches per season would be offered on a live basis over three seasons, from 2016-17 to 2018-19, up from 154 games in the current cycle.

The rights will be split into five packages of 28 matches and two packages of 14 matches, with one of the packages including up to 10 live games on Friday nights. No single buyer will be allowed to acquire more than 126 matches. The auction will take place early next year, with the rights expected to be awarded in February.

Ofcom noted the launch of the tender and will take into account its outcome. The regulator added that it will consider responses to today’s consultation and any further steps will be outlined in a second phase of the review in 2015.

Ofcom last month opened a competition investigation into how the Premier League sells its media rights following a complaint by pay-television operator Virgin Media.