Sky’s rivals want to punish it for being a success
BACK in 1997, Japanese carmaker Toyota took a gamble and spent $1bn (£603m) developing the Prius, its hybrid fuel vehicle. At the time, the panic over global warming had yet to develop and there was little call for a mass-market green car. In its first year of production, it sold just 300 units. Now the car is Japan’s fastest selling car and by far the most popular dual-fuel vehicle; it accounts for well over 50 per cent of the global hybrid market. It was a bet that paid off.
Twenty years ago, Rupert Murdoch took a similar risk by bringing multi-channel TV to the UK. Setting up Sky was massively expensive and, in the early years, the company suffered huge losses. But the firm has succeeded against the odds by buying up the rights to sports, movies and American imports, helping to build a loyal subscriber base that numbers almost 10m today.
Now Ofcom is carrying out a review of the pay-TV sector that is likely to recommend that Sky wholesale the premium content it spends billions on to rivals at regulated prices.
The idea is absurd, and savagely unfair to Sky which is understandably aggrieved at the potential harm it could do to its business. Toyota would be equally furious if a regulator ordered it to give its hybrid technology to Honda, Ford and GM.
Unlike former state-owned monopolies such as BT, Sky wasn’t handed these valuable assets on a plate. It started out as a new entrant and bought up the rights to movies and sporting events in an open market. In fact, it still does: there are regular auctions for this type of content and the rights always go to the highest bidder. If BT Vision, Top Up TV and Virgin Media want to trump Sky, all they need to do is up their bids.
Of course, they say they can’t afford to, and they’re probably right. But punishing Sky for being successful is not the answer. Nor can BT Vision and Top Up TV place their weak performance in recent years at Sky’s door; analysts say that these companies over-estimated the demand for two new entries into the pay TV market (as well as Sky and Virgin, there is the phenomenally successful Freeview and a whole host of online offerings modelled on the iPlayer).
Sky should also be lauded for its continued innovation, which has benefited its rivals. It pioneered personal video recorders with Sky+, which was no instant success but soon paved the way for a craze in time shifting that helped all broadcasters. And it took a massive gamble on High Definition television, enabling others to follow on after with much lower stakes.
The firm is surely hoping it can kick this issue into the long grass. Ofcom is unlikely to be able to force it to take any action before the general election, after which a Tory government is planning to clip the communication regulator’s wings. Sky is playing the waiting game. Let’s hope it wins. [email protected]