Will Sky really suffer from a wholesale price reduction?
As the debate regarding Ofcoms move to force Sky to reduce wholesale prices for its subscription channels rages in the press there is a growing feeling that Sky will actually benefit from the move. On the face of it a 23% reduction in wholesale prices does not look good news for the company but when you consider that the likes of BT and Virgin Media will take up these reduced cost services and market this to a wider audience we could actually see significant new income streams coming into the company.
The stock market initially reacted with concern regarding the announcement by Ofcom but this has since turned around as investors and analysts look further into the situation. We will only really see the full potential benefits of the move by Ofcom in the weeks and months ahead if the legal objection by Sky and the Premier League is unsuccessful.
As we touched on yesterday, the Premier League has instigated a review of the move which could cost the UK football industry hundreds of millions of pounds in the future. What on the surface appears to be a very simple and very straightforward move is actually a lot more complicated than many people initially assumed.
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