Kiwis pay up for popular TV shows
New Zealanders are probably paying the highest prices in the world to watch hit series such as Desperate Housewives, CSI and Downton Abbey, according to Sky Television.
That could be either directly through pay-television subscriptions, or indirectly, passed on through the cost of goods and services advertised on television.
"The price that content providers receive from New Zealand broadcasters for shows like Desperate Housewives, CSI and Downton Abbey and the rugby is probably the highest per capita in the world," chief executive John Fellet said.
Fellet made the claim after the surprise announcement of a potentially far-reaching Commerce Commission investigation into Sky, which caused its shares to dive 7 per cent to $5.07 and could loosen Sky's grip on the pay-television industry.
The commission said it had identified two companies that might join Australian company Quickflix in competing with Sky by providing television services online at a cost of about $10 a month, and another that planned to sell movies online.
But it was nevertheless concerned that the terms on which Sky acquired programming might have denied rivals access to "a critical mass of quality content" in breach of the Commerce Act.
The commission will also consider whether Sky's agreements with telecommunications companies, including TelstraClear, Telecom, and Vodafone, breach the act by stopping them offering competing services or assisting rivals.
Fellet said the high prices charged by overseas programme makers indicated there was intense competition for their content in New Zealand.
But Victoria University broadcasting lecturer Peter Thompson said the argument might not help his case. "John Fellet is pointing to a market failure here, because quite clearly competition is not leading to the highest-quality services at the lowest prices for the consumer. The fact prices are being driven up by competition is very good news for content providers. It is not particularly good news for consumers."
Kensington Swan competition lawyer John Land said the sections of the Commerce Act under which Sky was being investigated could lead to fines of up to $10 million or even 10 per cent of a company's revenues, but it was not uncommon for "administrative settlements" to be reached in complex cases. Investigations could take more than a year, but he believed the commission would want to conclude a "high-profile" investigation such as Sky's within months.
At issue would be whether Sky breached section 36 of the act by misusing its market power to eliminate, restrict or deter competition, or entered into an arrangement that was likely to have the effect of substantially lessening competition in breach of section 27.
Communications Minister Amy Adams said it was good the commission was looking at the issues as it was "always my view that was within their jurisdiction".
Clare Curran, Labour's communications spokeswoman, said she was concerned the investigation might be weakened if the Government decided not to reappoint Ross Patterson as telecommunications commissioner later this year.
Deutsche Bank analyst Arie Dekker said there was enough in the commission's announcement to provide uncertainty for Sky investors, but by early afternoon fewer than 0.2 per cent of Sky's shares had changed hands, which could not be described as mass-selling.
The commission cleared Sky's Igloo discount pay-TV joint venture with Television New Zealand, which will launch in June.
Sky spokeswoman Kirsty Way said Sky was "a little surprised" by the new investigation but very confident that its outcome would be positive for Sky.
Way said Sky faced the same challenges as today's new entrants in building "critical mass" when it set up in New Zealand in 1990.
If anything, they would find it easier because they could soon deliver programming over ultrafast broadband, while setting up Sky's satellite transmission service had been "extraordinarily expensive", she said.
- © Fairfax NZ News
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