BSkyB forced to cut cost of sport services
Regulator Ofcom has today stirred something of a hornet's nest after demanding that BSkyB reduce the wholesale cost of premium sports channels which it charges competitors. This comes after a three-year review and the conclusion that BSkyB has allegedly looked to quell competition in the sector by simply keeping the cost of premium sports channels high for competitors. However, BSkyB has refuted these allegations and legal action is pending with regards to the proposed price changes.
Ofcom is looking to introduce more choice and more competition into the TV and media sector after complaints by Virgin Media, BT, Top Up TV and the now-defunct Setanta. As a consequence BSkyB is being forced to reduce the wholesale cost of Sky Sports 1 and Sky Sports 2 by 23.4% although a bundle of the two channels will be reduced in cost by 10.5%. While the reduction in the bundle price is better than many had expected it will still impact slightly upon BSkyB profits going forward.
While there is no doubt that BSkyB, from a zero base and with significant investment, is now a major player in the UK TV, satellite and media market, the company believes it took a risk in the early days and is now being rewarded with the benefits. Whether the proposed price reductions will be delayed pending legal action remains to be seen but BSkyB appears determined to fight this all the way.
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