sky movies (excess profits)

[Ignitionnet]

Originally Posted by ahardie

So basically you agree with my argument then and if opening up VM's network works in our interests then I am in favour. That is really for another thread anyway and a different CC investigation and is off-topic in this thread. This thread is about Sky running a monopoly and ripping people off. Something I thought we would all be against. I suspect that what you are proposing would weeken a Sky competitor and move us closer to a total Sky monopoly though which isn't in our interests. But perhaps the competition comission shouls investigate. Until it does it's a red herring.

I've no interest in weakening a competitor to Sky and have little interest in this decision as it stands, my irritation is in how one-sided the ongoing regulatory work in this space is. It's all about opening up Sky and BT's content and networks with no concessions being asked for or given by the company that supplies half of all pay TV and broadband services to half of the country.

It's the inconsistency which is the irritation.

Other than that I'm fine with Sky being pulled up for overcharging, don't misunderstand me, Sky are at heart a brutal, soul-less money-making machine, same as pretty much every other company of any size

EDIT: With this in mind I've asked my MP about the situation although this whole thing is a bit of a sore point with him I suspect

[Big-Ted]

Originally Posted by Ignitionnet

I've no interest in weakening a competitor to Sky and have little interest in this decision as it stands, my irritation is in how one-sided the ongoing regulatory work in this space is. It's all about opening up Sky and BT's content and networks with no concessions being asked for or given by the company that supplies half of all pay TV and broadband services to half of the country.

It's the inconsistency which is the irritation.

Other than that I'm fine with Sky being pulled up for overcharging, don't misunderstand me, Sky are at heart a brutal, soul-less money-making machine, same as pretty much every other company of any size

EDIT: With this in mind I've asked my MP about the situation although this whole thing is a bit of a sore point with him I suspect

Sky 10 million TV customers, Virgin Media less than 4 million, factor in other Pay TV suppliers and how does Vitgin supply half ?

As to BB according to http://www.ispreview.co.uk/review/top10.php the numbers are

BT Retail (PlusNet, Brightview) 5,529,000

Virgin Media 4,242,900

TalkTalk Group (AOL, Opal, Tiscali) 4,224,000

Sky Broadband (BSkyB) 3,006,000

Orange (Everything Everywhere) 795,000

O2 (BE Broadband) 663,800


Once again hardly half...........

[Ignitionnet]

Care to try reading that again, in between the gloat-fest?

the company that supplies half of all pay TV and broadband services to half of the country.

The company that supplies half of all services to half the country.

50% penetration in serviced areas which are approximately 50% of the country.

Fixed line penetration in the UK is about 65%, Virgin pass about 12,600,000 homes.

Virgin listed their broadband cable customer base at the end of the previous reporting quarter as 3,969,000.

As of last quarter Virgin were 130,000 short of the 50%, assuming that uptake of broadband services is equal within and outside their passed areas and all their passed areas are broadband capable. At current growth rate they'll be at that 4,095,000 to get the 50% within 6 months. This being 50% of 65% of 12.6 million.

I hope this makes things clearer.

[Tod]

If Virgin have to open up their cable then Sky should open up their EPG!

Anyhow, why are we talking about Virgin when the thread is about Sky's excess profits? Shouldn't this be discussed on another thread?

---------- Post added at 09:39 ---------- Previous post was at 09:33 ----------

Originally Posted by Ignitionnet

Oh I see, so being a monopoly is fine so long as you accumulated debt to get there?

The law and every other definition of a monopoly disagrees. Financial state is totally irrelevant to monopoly status. Virgin's debt is more than manageable according to their financial results.

Also of note is that a proportion of Virgin's debt is due to the acquisition of Virgin Mobile, most of the debt from acquisition of cable franchises. That's what the cost was, not the construction of them but overpaying on acquisitions, and most of this was wiped off in debt for equity swaps by ntl and Telewest.

Bad business decisions and being the poster child for the .com boom does not a company immune to monopoly status make.

"Monopoly - Market situation where one producer (or a group of producers acting in concert) controls supply of a good or service, and where the entry of new producers is prevented or highly restricted. Monopolist firms (in their attempt to maximize profits) keep the price high and restrict the output, and show little or no responsiveness to the needs of their customers."

This is NOT what Virgin are doing by keeping control of their own cable - but IS what Sky are doing with the movie content!

[TheDon]

Originally Posted by Tod

"Monopoly - Market situation where one producer (or a group of producers acting in concert) controls supply of a good or service, and where the entry of new producers is prevented or highly restricted. Monopolist firms (in their attempt to maximize profits) keep the price high and restrict the output, and show little or no responsiveness to the needs of their customers."

Bolded bit especially is why VM is not and never will be a monopoly, and why the broadcast side of Sky could never be a monopoly.

Anyone can build a cable network, just plough money into it and build your network. If VM's network (like BT's) reached every home in the UK and was therefore cost prohibitive to build (due to the cost of reaching rural areas where there's limited scope to recoup costs) then it'd be a monopoly, but as it stands it only passes areas that would be deemed as financially viable to replicate.

The reason Sky is a monopoly is because the channel side of their company is highly restrictive to enter, exclusivity deals (with staggered end dates so outbidding on rights is a difficult thing to manage with making sure you get enough content to make the channels viable) being a huge part of that.

[Ignitionnet]

Originally Posted by Tod

If Virgin have to open up their cable then Sky should open up their EPG!

Sky's EPG is open, this is enforced as part of their operating licence.

---------- Post added at 10:21 ---------- Previous post was at 10:05 ----------

Originally Posted by TheDon

Bolded bit especially is why VM is not and never will be a monopoly, and why the broadcast side of Sky could never be a monopoly.

Anyone can build a cable network, just plough money into it and build your network. If VM's network (like BT's) reached every home in the UK and was therefore cost prohibitive to build (due to the cost of reaching rural areas where there's limited scope to recoup costs) then it'd be a monopoly, but as it stands it only passes areas that would be deemed as financially viable to replicate.

Given that Virgin Media's predecessors both went through bankruptcy protection and debt for equity swaps this is debatable and within VM's passed areas there is no way that replicating their network could be done financially viably as the market is saturated. To be viable a new entrant would need to capture nearly half of the customer base in the area. The penetration of altnet services in Europe is sub-20% and price pressures are heavy right now.

This same argument could be applied to BT in areas where they overlap Virgin Media, and to an extent is, however this only applies to the charges BT are allowed to levy in the areas all open access obligations remain.

Regardless being a monopoly isn't the issue, the question is one of Significant Market Power.

Do Sky have SMP within Pay TV - yes, which is why they are regulated.
Do BT have SMP - yes, which is why they are regulated.
Do Virgin Media have SMP - within their passed areas clearly yes, however Ofcom side-step this by taking their market share nationwide.

Kingston Communications have regional SMP while VM don't. There are a number of contradictions however cable has been favoured since its conception.

[Digital Fanatic]

Originally Posted by Ignitionnet

Sky's EPG is open, this is enforced as part of their operating licence.

---------- Post added at 10:21 ---------- Previous post was at 10:05 ----------



Given that Virgin Media's predecessors both went through bankruptcy protection and debt for equity swaps this is debatable and within VM's passed areas there is no way that replicating their network could be done financially viably as the market is saturated. To be viable a new entrant would need to capture nearly half of the customer base in the area. The penetration of altnet services in Europe is sub-20% and price pressures are heavy right now.

This same argument could be applied to BT in areas where they overlap Virgin Media, and to an extent is, however this only applies to the charges BT are allowed to levy in the areas all open access obligations remain.

Regardless being a monopoly isn't the issue, the question is one of Significant Market Power.

Do Sky have SMP within Pay TV - yes, which is why they are regulated.
Do BT have SMP - yes, which is why they are regulated.
Do Virgin Media have SMP - within their passed areas clearly yes, however Ofcom side-step this by taking their market share nationwide.

Kingston Communications have regional SMP while VM don't. There are a number of contradictions however cable has been favoured since its conception.

Do you think it's because Ofcom want a strong competitor to Sky and if they allowed others to use VM's network, this may water down VM's market share?

[Ignitionnet]

Originally Posted by Digital Fanatic

Do you think it's because Ofcom want a strong competitor to Sky and if they allowed others to use VM's network, this may water down VM's market share?

I have no idea what Ofcom want, you'd need to ask them that.

[Digital Fanatic]

Originally Posted by Ignitionnet

I have no idea what Ofcom want, you'd need to ask them that.

Just putting it out there

Might be the reason they don't regulate VM.

[Tod]

More the point, Virgins exclusivity on it's own cable is not stopping or restricting other companies from being able to do business.

[LexDiamond]

Originally Posted by Tod

If Virgin have to open up their cable then Sky should open up their EPG!

Anyhow, why are we talking about Virgin when the thread is about Sky's excess profits? Shouldn't this be discussed on another thread?

---------- Post added at 09:39 ---------- Previous post was at 09:33 ----------



"Monopoly - Market situation where one producer (or a group of producers acting in concert) controls supply of a good or service, and where the entry of new producers is prevented or highly restricted. Monopolist firms (in their attempt to maximize profits) keep the price high and restrict the output, and show little or no responsiveness to the needs of their customers."

This is NOT what Virgin are doing by keeping control of their own cable - but IS what Sky are doing with the movie content!

The definition of monopoly applies to all forms of that product and not just one variation of it. Correct me if I am wrong (as I don't watch movies) but movies are still available through rental operators and through the Sky channel (which is available on VM and therefore covers the pay tv market) and prior to this it was available in cinema.

Sky isn't withholding content from anybody with regards to movies. I suspect this whole investigation has more to do with it being the right time to knock Sky than to do with movies as Sky offer a comprehensive movie service which is actually excellent VFM to the customers.

[TheDon]

Originally Posted by Ignitionnet

Sky's EPG is open, this is enforced as part of their operating licence.

It may be "open" but the EPG queue has been closed for a long time now due to limitations with their SD boxes channel capacity.

Originally Posted by Ignitionnet

Given that Virgin Media's predecessors both went through bankruptcy protection and debt for equity swaps this is debatable and within VM's passed areas there is no way that replicating their network could be done financially viably as the market is saturated. To be viable a new entrant would need to capture nearly half of the customer base in the area. The penetration of altnet services in Europe is sub-20% and price pressures are heavy right now.

This same argument could be applied to BT in areas where they overlap Virgin Media, and to an extent is, however this only applies to the charges BT are allowed to levy in the areas all open access obligations remain.

Regardless being a monopoly isn't the issue, the question is one of Significant Market Power.

Do Sky have SMP within Pay TV - yes, which is why they are regulated.
Do BT have SMP - yes, which is why they are regulated.
Do Virgin Media have SMP - within their passed areas clearly yes, however Ofcom side-step this by taking their market share nationwide.

Kingston Communications have regional SMP while VM don't. There are a number of contradictions however cable has been favoured since its conception.

I don't disagree that in areas passed VM have a very strong footing, however if this translates to SMP in those areas isn't quite as black and white.

SMP would mean that in those areas they can dictate terms, but we don't see them able to do that. That Sky can continually withhold channels from them shows that VM's MP isn't that significant. On a region level for broadband you can easily argue that it is, but for TV the situation is far more difficult to judge.

I think VM gets away with it's SMP on broadband due to it lacking SMP on TV, when you look at the company as a whole you can't say that VM has SMP, but when you break it down into the individual components (TV, phone, BB) then you can easily see signs of SMP.

So is having SMP in one aspect of your business enough for regulation? Apparently Ofcom don't think so.

[mersey70]

I have now had chance to read quite a bit of OFCOM's and the CC comment's regarding the investigation of Sky's movie deals.

It seems it centres on the fact that Sky (as has been acknowledged) have invested heavilly and taken immense risks. It further seems that those risks were largely taken in the past, the debt is now paid back and (perhaps) outweighed by the level of profits they are making now and not just in sports broadcasting and that's why it is now felt it is time to have a look at the movie deals. So long as there is no witch hunt that seems fair enough to me.

However regarding VM opening up their BB network we may well find ourselves having a similar conversation when they finally get out of debt too. They have taken risks too and when those risks are finally bearing fruit I have no doubt they will be looked at in a similar way to Sky as indeed they should, they are both after all private companies. Once they are debt free and have been for a while I wouldn't be one bit surprised if they are told to allow others access to the infrastructure.

[Ignitionnet]

Originally Posted by Digital Fanatic

Just putting it out there

Might be the reason they don't regulate VM.

Just to resurrect this thread I was interested in this so asked my MP, he has written to Ofcom indicating I present some good points and asking them for an explanation of the discrepancies between the regulation of VM, BT and KT.

[LexDiamond]

Shouldn't the real question be why Sky tv is regulated at all?