An out-of-court interim settlement has been reached in a dispute between BSkyB and other content providers about whether the satellite broadcaster should be required to sell on Premier League matches wholesale to other platforms. The agreement is seen as a ‘score draw’ by analysts. BSkyB agreed to stop efforts to block an Ofcom ruling on April 1 that it must sell football content, but it will continue to pursue its main legal challenge to the ruling. This could take nine months to sort out.
An out-of-court interim settlement has been reached in a dispute between BSkyB and other content providers about whether the satellite broadcaster should be required to sell on Premier League matches wholesale to other platforms. The agreement is seen as a ‘score draw’ by analysts. BSkyB agreed to stop efforts to block an Ofcom ruling on April 1 that it must sell football content, but it will continue to pursue its main legal challenge to the ruling. This could take nine months to sort out.
Under the terms of the settlement, BSkyB will sell at the price it currently charges Virgin Media, its only current wholesale customer. This is 10 to 23 per cent higher than the levels set by Ofcom. The difference between the two prices will be held in escrow (in the custody of a third party) until BSkyB’ s appeal has been held. BSkyB argues that Ofcom has exceeded its jurisdiction and says that it was wrong in law to say the satellite broadcaster had market power in pay television.
In news that will be welcomed by fans BT has said that it will seek to undercut BSkyB on price straight away. It would take the risk that BSkyB might win its appeal. This makes sense given that BT Vision is trying to build market share. In essence they are making a bet on the soundness of Ofcom’s conclusions.
BSkyB have certainly not run up the white flag and this was reflected in a 29p rise in their share price yesterday. However, the main driver was a better than expected rise in subscription numbers. Demand for high-definition services helped BSkyB add 62,000 net customers in the third quarter and pushed up the average annual amount spent by each subscriber to over £500. However, Sky is continue to push its 3D offering whereas Virgin Media has staked its future on high definition.
These developments are not likely to lead to an immediate change in the cost of watching live Premier League football, nor do they present any kind of threat to the Premiership’s financial model. However, the evolution of the market within a changing regulatory context does have a longer-term significance which is why BSkyB is going to court.