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Commission finds that Sky is making “excess profits” on movie channels

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By The Drum Team, Editorial

February 8, 2011 | 2 min read

The Competition Commission has said in its preliminary findings that BSkyB is making “excess profits” on its movie channels, increasing the likelihood that it may be forced to change the way it deals with rivals and US studios.

The competition regulator’s findings follow an investigation into Sky’s exclusive output deals with the six major Hollywood studios, with the regulator saying the analysis on which its view is based was "conservative" and "its results are likely to understate Sky's profitability and the profitability gap".

It continues to say that in its early, risk-taking days, Sky should have been allowed to make excess profits, but added "we would not expect such profits to persist for a significant period of time".

"It appears to us that Sky's excess profits can no longer be explained by the risk of its earlier investments."

BSkyB said it believes that its profitability today reflects its past investments. A spokesperson commented: “the Competition Commission's movies investigation is at a preliminary stage and we will respond to its working papers as the process continues."

The commission will publish its provisional findings in April, and Sky and other interested parties have until 25 February to make submissions.

Ofcom asked the Competition Commission in August last year to look at Sky's deals with studios and the prices it charges rivals to broadcast channels including Sky Movies Premiere.

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