01 Apr 10

Sky told to cut wholesale prices by regulator Ofcom

By Sean Japp, Head of TV

Broadcasting regulator Ofcom has told Sky it must cut the price it charges rivals to show its premium sports content. The broadcaster will have to sell Sky Sports 1 & 2 for up to 23% less than the current wholesale price.

Sky has already announced that it will appeal against the “unwarranted intervention”, stating that it would be detrimental to consumers. Sports bodies are also up in arms at the possible threat of future revenues deteriorating to themselves from Sky with the English Premier League stating that it was “very disappointed” and they will study the findings carefully.

One fly in the ointment for Ofcom could well be that Sky place all “premium” sporting events onto Sky Sports 3 and 4 as Ofcom do not have any power over the content of those channels. In doing this, Sky would probably be hit with further regulation by Ofcom which could take a further 3 years.

Sky will be offered some level of protection should its rivals start heavily discounting its sports channels in order to woo new customers. The wholesale price will be set on a retail minus basis – essentially a discount to the price that Sky charges its own viewers. Sky will, of course, still make profit on every customer signed up by its rivals.

So, in essence, Sky win.... again! As the legendary Andy Gray would say “Rupert Murdoch………take a bow son!”