As if they didn't have enough problems, the Hollywood studios and Europe's pay-TV players are being investigated by European Union antitrust regulators over the sale of TV rights to movies.
Brussels investigators have asked the seven major studios to explain the TV distribution contracts for their movies. Those contracts bring in an estimated $1.5 billion annually to the studios from sales to pay TV services across Europe.
(Sales to terrestrial stations in Europe bring in another $2.5 billion a year. It's not clear whether the probe will be widened to include Hollywood's deals with terrestrial stations.)
The inquiry, which was reported by Britain's Financial Times Tuesday, is still at a preliminary stage but the European Commission is apparently concerned that the contracts might stifle competition among studios -- and prevent the entry of other pay services in Europe.
Ironically, the international TV biz is probably less cosseted and more cut-throat now than it was a decade ago; however, there's little doubt that it's dominated by a handful of sellers and an equally dwindling number of powerful buyers. Given global consolidation, sellers and buyers may actually be owned by the same conglom.
One EU concern is the relationship between satcaster BSkyB in the U.K. and one of its key program suppliers -- Fox: Both are owned by Rupert Murdoch's News Corp. News Corp. also now owns the sole pay platform in Italy and is a supplier to it.
The relationship between Canalsatellite in France and one of its main program suppliers, Universal, is also expected to receive additional scrutiny. Both are owned by Vivendi Universal.
Sony Pictures TV Intl. prexy Michael Grindon pointed out that the EU has looked at program supply agreements several times in recent years and that as a general rule "the interests of the majors in keeping the landscape competitive align with the interests of the Commission.
"When we get inquiries from Brussels, we try to comply," he said.
In Britain BSkyB is effectively the only satellite game in town, though in France Canal Plus has a rival in TPS.
Several long-term deals for Hollywood product are coming up for renewal at BSkyB over the next 18 months and the renegotiations are expected to be tough.
The Hollywood majors have generally been in favor of competing platforms in most European countries as they believe such competition leads to higher prices for product.
That's in fact how they collectively got Germany's Kirch Group to pay such stunningly high prices for product back in 1996 for fledgling paybox Premiere. Rival Bertelsmann was at the time going after the same deals.
The prices Kirch paid for Hollywood movies eventually helped bring the company to its knees.
Both BSkyB and Canalsatellite have apparently been asked by EU regulators to supply details of their current contracts with all the majors.
The inquiry could lead to changes in the way Hollywood sells TV rights to Euro broadcasters, impacting in particular the duration, exclusivity and terms of pay TV contracts.
Some Hollywood deals in Europe still go out as long as 10 years and are exclusive. If one player gets four or five Hollywood studios to supply it with movies, it's very difficult for a would-be rival to launch a healthy alternative service.
A source within the Hollywood distribution biz, however, told
Daily Variety that, if anything, there was more coziness among buyers of product, who, he suggested, "often informally agreed what ceiling they'd put on their offers for shows." He would not be more specific.
Hollywood studios do not typically reveal the prices they get abroad for individual series or movies, but press reports over the years suggest that there is a wider variation in prices paid for shows nowadays than a decade ago. Many American shows don't sell abroad at all, while hot ones can go for very steep prices.
Prices for Hollywood movies adhere to a complicated formula but are ultimately based on the domestic box office gross of the film Stateside.
The commission is seeking reassurances that studios do not collude in setting prices and terms for movie rights -- an allegation they deny.
David Hulbert, president of Walt Disney TV Intl., told the Financial Times that his studio was not engaged in exclusive or anti-competitive deals and pointed out that it supplied Viv U's Canalsatellite, its rival TPS and the cable TV industry in France.
The Brussels inquiry reportedly was sparked by a complaint by TPS about alleged anti-competitive film tie-ups between several Hollywood studios and Canalsatellite.
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