The OFT's decision not to take action over Sky's 'monopoly' has angered hundreds of licensees. Jackie Annett examines a fraught relationship
Many licensees were left shocked and angry last week as news broke that the Office of Fair Trading (OFT) does not intend to take action against Sky over its commercial service to pubs.
Officials have dropped the investigation, claiming there was insufficient information about the market to continue with the case. For nearly two years, licensees have been waiting patiently while the OFT has been conducting an investigation into what many see as Sky's monopoly over the pub TV market - and this wasn't the decision they were expecting.
The inquiry was launched after licensees complained that Sky's prices were too high. They accused Sky of having an unfair domination of the market with no real competitors, especially after ITV Digital's collapse in May this year.
Sky's competitors, mainly ITV Digital, Telewest and cable at the time, agreed with them, accusing the company of hiking up its charges when supplying football coverage to rival broadcasters in a bid to knock any competition out of the ring. And some might say that with ITV Digital this has worked.
But the trade was hoping that the OFT would rule that Sky's practices were unfair, forcing the broadcaster to reduce its subscription charges, allowing new broadcasters into the marketplace and driving up profits for licensees showing sport.
Now many licensees feel cheated by the OFT's decision. They disagree wholeheartedly and want the OFT to look at the situation again. Mike Trow, who runs the Pig & Truffle in Rugby, Warwickshire, said: "How can they say this when subscriptions have virtually doubled in the last two years.
"Sky is in a win-win situation. In a lot of pubs, Sky doesn't make that much of a difference to profits, but then at the same time, licensees can't afford to be without it because their customers expect it.
"For two years I have been considering taking Sky out of my pub but have been waiting for the OFT's ruling. This is a terrible decision."
He went on to suggest that the company's price banding should be changed. He said a system where licensees pay an amount relative to turnover rather than the pub's rateable value would be much fairer.
He is just one of hundreds of licensees who has been left devastated by the news. Stuart Allan, who runs the Craighlaw Arms in Kirkcowan, Dumfries and Galloway, has already called for all licensees to boycott the company after he was asked to pay a £150 charge for the Premiership Plus package of extra football matches on top of a 12.5 per cent increase in his basic commercial subscription.
This latest news has only served to anger him more. "The OFT has come to the conclusion that Sky is charging pubs what they think is a reasonable rate on what pubs are getting in return for their money, but not all pubs are getting the return that the OFT has surmised," he said.
"Many pubs have seen their subscriptions almost double and for what? There needs to be more competition in the market and the collapse of ITV digital has not helped matters.
"When ITV Digital first launched, Sky stopped putting its prices up so much, now it can do whatever it wants."
In light of this unrest within the industry, The Publican requested an interview with Iain Holden, Sky Business's commercial director.
We wanted to put to him some of the licensees' burning questions on unfair competition in the market, high subscription charges, price banding and the collapse of ITV Digital. We also wanted to know what Sky would be doing about the fact that it has so many unhappy customers.
But Mr Holden has so far refused to be drawn on the issue, referring us instead to the statement issued shortly after the OFT announcement.
It said simply: "Sky notes the decision by the OFT and continues to offer publicans the choice of providing superb TV entertainment to their customers."
But there was a glimmer of hope for campaigners. Nick Bish, chief executive of the Association of Licensed Multiple Retailers, told The Publican that he will fight to have the decision reversed.
He said he had already made a submission to the OFT, but would be working with licensees to gather as much additional information as possible and would be writing to the government again within the next week.
"Sky has a good product and it's a welcome facility for retailers, but if the cost is out of all proportions to the benefit then who wins? The retailer certainly doesn't," he added.
And the OFT confirmed it would be willing to look at the case again if it was presented with "significant evidence". So what happens now? The trade is left with the hope that the OFT could reverse its decision in the future and that Sky will be forced to reduce its subscription charges. Only time will tell if this will be the case, but hopefully not another two years down the line.
The last two years...
- Aug 2002: The Office of Fair Trading decides there is insufficient evidence that Sky is abusing its position in the market
- June 2002: Sky launches its new live horse racing channel
- May 2002: ITV Digital is switched off - leaving thousands of publicans without the channel and Sky
- without any real competitor in the pub trade
- Sep 2001: ITV Digital reports that the launch of its commercial package has been a success
- Aug 2001: Sky announces latest prices for the new season which it says are its fairest yet - but many publicans are still unhappy, saying high prices are forcing them to pull the package from their pubs
- July 2001: The European Commission launches an investigation into Sky's supply of the Discovery and Disney channels to ITV Digital
- July 2001 Sky launches a new package for publicans who want to show an extra 40 Premiership football matches for £75 - in an attempt to rival ITV Digital
- July 2001: Greene King takes Sky out of half of its 1,500 estate
- June 2001: 6C Retail, Punch Retail and Scottish and Newcastle Retail also announce the decision to remove the Sky package from some of their pubs
- Dec 2000: The OFT shifts the focus of its ongoing investigation into Sky to whether it is abusing its market domination. Previously it was focused on the charges made by Sky to supply its programmes to rival broadcasters
- July 2000: Sky agrees to review the way it calculates its fees following a wave of protests about the latest round of increases.
Related articles:
OFT to take no further action over Sky (23 August 2002)
Licensee calls for Sky boycott over latest price increase (5 July 2002)
Pubs hit as ITV Digital is turned off (2 May 2002)
OFT expected to rule against Sky (8 January 2002)