Sky movie role faces competition probe
UK media regulator Ofcom has referred the market for pay-TV movies to the Competition Commission, amid concerns that Sky's role is too dominant.
It said it had "reasonable grounds" to suspect that Sky's distribution of major Hollywood films restricted or distorted competition.
Consumers were unlikely to benefit from more choice and innovation without intervention, it said.
Sky said the referral was "unecessary" and "bad news for consumers".
Ofcom also raised concerns about high prices for Sky's premium film channels.
"We are concerned that Sky will maintain and exploit its market power by restricting the distribution of its movies channels and exploitation of subscription video on demand," Ofcom said.
The regulator said it was concerned about the distribution of major new releases in the first instance, but also the continuing supply of films through pay-TV packages.
It said it would have preferred a commercial solution to address these concerns, but discussions with film studios "gave us a clear view that change was unlikely".
But Sky defended its position, arguing that any investigation could undermine innovation.
"There have never been so many ways to access movies, with innovation stretching across a wide variety of channels and platforms, including multiple ways to access Sky Movies," a spokesman for the broadcaster said.
"Further prolonging this unnecessary investigation will only create uncertainty and serve to undermine incentives to invest and innovate, which is bad news for consumers."
Last week, BSkyB, which operates Sky, reported a sharp jump in annual profits, driven by new subscriptions, particularly for high definition (HD) services.
Pre-tax profit for the year to the end of June came in at £878m, up more than threefold on the £259m the broadcaster made in the previous 12 months.
It also announced a multi-year deal with US network HBO, producer of hit shows such as Sex and the City, Curb Your Enthusiasm and The Wire, to broadcast some of its programmes exclusively.
Earlier this year, Ofcom ruled that BSkyB needed to reduce the price that it charged rival broadcasters to air its Sky Sports 1 and Sky Sports 2 channels.