Netflix and Lovefilm have cancelled out Sky’s monopoly over Hollywood films on TV and saved the satellite broadcaster from having to cut the cost of Sky Movies to competitors.
UK competition regulators have decided not to force changes on Sky, but they say the UK pay-TV industry is still unfairly balanced in Sky’s favour.
The Competition Commission’s provisional ruling goes against advice from media regulator Ofcom, which said new online film services have yet to make a strong impact.
The commission decided that even though Sky still has deals with all six major Hollywood studios, recent deals with Netflix and Lovefilm - which will show The Hunger Games - show it doesn’t have a monopoly.
Laura Carstensen, chairman of the Movies on Pay TV market investigation at the commission, said: “Competition between providers of movie services on pay TV has changed materially and, as a result of these changes, consumers now have much greater choice.
“Lovefilm and Netflix offer services which are attractive to many consumers and they appear sufficiently well resourced to be in a position to improve the range and quality of their content further.
“Sky is about to offer Sky Movies on Now TV, which will make Sky Movies available unbundled from other pay-TV content and not requiring a subscription to a traditional pay-TV platform.
“We still believe that competition in the pay-TV retail market overall is ineffective. However, the scope of our investigation is limited and, for the purposes of our inquiry, consumers’ choice of pay-TV platform can more easily be decoupled from their choice of pay-TV movie service.
“Sky Movies no longer provides Sky with the advantage that it used to when competing with other traditional pay-TV platforms, like Virgin Media or BT Vision.”
The commission highlighted the ability of Amazon-owned Lovefilm to win deals for both the Twilight and Hunger Games movie franchises in the crucial ‘first subscription pay-TV window’.
This is the period which has been exclusive to Sky Movies for more than a decade, about 6-18 months after a film’s cinema release.
Ofcom asked the Competition Commission to look into films on pay-TV last year, as part of its long-running investigation into the British pay-TV industry and Sky’s apparent monopoly over films, sport and US TV shows.
Last August, the commission decided that Sky had a monopoly, but asked for more time to examine the effect of new arrivals.
The Pay-TV inquiry has already seen the Competition Commission order Sky to cut the price of its sports channels to rival services - a decision which is the subject of an appeal itself lasting more than a year.
The Competition Commission’s latest decision is provisional, and it will publish a final ruling by August 3, 2012. Comments on the provisional ruling can be sent to firstname.lastname@example.org until June 13, 2012.