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Is Richard Wrong?

October 25, 2009

Disclosure:-  I am a Sky employee but at the end of the day I have an opinion as well. The views expressed do not represent official Sky policy.

sky150x150This is something I came across an felt it was time to dig out the soapbox.

I like Richard Branson he has done many things right. Invests in business that is good for UK business and the economy, and he represents the idea that anyone can go from little to large with a little work, skill and determination.

But I think Richard is wrong on this one.

Richard Branson calls on the government to reform the pay-TV market to ensure smaller players can challenge

Sky’s “iron grip” on premium content such as sports matches and first-run films. He argues that just as Virgin was able to stimulate competition in the airline industry and thus bring down prices, it should be possible for smaller TV companies to compete for rights to major sports events and other content.

The fact that Sky is able to outbid most other broadcasters and that the firm sells its premium pay-TV channels to other pay-TV operators selectively and at very high prices, is anti-competitive and bad for the customer, Branson argues. He claims Sky now accounts for some 85 per cent of all premium pay-TV subscribers – a level of concentration that, in any market, would attract the attention of even the most laisser faire regulator.

He backs the Ofcom ruling that Sky must sell some of its premium channels and claims this would be an excellent result for consumers because it will enable each pay-TV operator to compete based on its different strengths .

I think this is wrong for so many reasons and I will go through the points that I disagree With.

Reform the pay-TV market to ensure smaller players can challenge

When Sky started out they were a small company and they took on the big guys who were the incumbent terrestrial broadcasters i.e. the BBC (who is funded through a guaranteed income by the general population through a TV licence where payment is not optional) there was also the ITV companies who gain there revenues mainly with advertising.

By taking risks with new technology and a new direction in the types of programming and technology and by delivering excellent customer service (possible bias alert) this is one of the reasons how sky has gone from a small company to the large company that you know today.

 

Sky is able to outbid most other broadcasters.

Because Sky have been successful in continually developing new technology and in offering the best programming available and in commissioning in-house new and varied programming also by delivering excellent customer service and a product that their customers want. Because of their large subscription base they are able to invest the money back into the business to continue to offer the best available service.

 

And that the firm sells its premium pay-TV channels to other pay-TV operators selectively and at very high prices, Personally I think that it represents good will as well as good business sense that Sky do this, but where does is say that when sky take all the risk it’s competitors should reap the rewards (with no risk) and benefit from better pricing than Sky’s own subscribers, I think not.

It is worth mentioning that the other suppliers can do the same as Sky invest and develop the products but for whatever reason they do not, what they do is purchase content from sky.

Remember that they choose to purchase programming are not obliged to do so. Sky are also entitled to set business rates and subscriber rates as it sees fit after all if is a free economy, you don’t like the price, inform them with your feet, any business will get the message quickly.

is anti-competitive and bad for the customer.

I can not see why it is anti-competitive as sky do not dictate what their competitors charge for subscription, they do not dictate their programming and technology policy’s and do not dictate how they deliver their customer service.

I also can’t help but wonder about the phrase “If the shoe was on the other foot” and as for bad for the customer I cant see why the customer always has a choice as who they use (subject to certain criteria).

He backs the Ofcom ruling that Sky must sell some of its premium channels and claims this would be an excellent result for consumers because it will enable each pay-TV operator to compete based on its different strengths .

If Sky’s competitors feel they cannot compete for whatever reason in an open market and they feel that they must get government in to support a business model that they cannot get to work as well as their competitor what strengths are we talking about?

I really don’t know what to say about the Ofcom ruling, does that mean that you are not entitled to run a successful business in a manner that you see fit (within the law of the land).

Sky have and continue to innovate both their programming and technology programme i.e. Sky+ & Sky+HD On Demand, Anytime, 3D TV,Broadband and telephone services by continually reinvesting in their business.

Take HD for example no other broadcaster has innovated so much in this area, again it comes down to risk both in reputation and financial and when it does workout for sky their competitors cry fowl because they are ether unwilling or unable to do the same.

Don’t get me wrong there are things sky could still do better and infact some things I think are wrong and should be changed as a customer but on the general I am happy with the service.

I would like to know your thoughts.

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