BSkyB has for years held exclusive rights to the movies of the major Hollywood studios in the first subscription pay-TV window, the UK’s Competition Commission pointed out in a provisional report issued today, saying Sky’s large subscriber base is preventing rivals BT and Virgin Media from bidding successfully against Sky for these rights. BSkyB responded by saying it will cooperate with the the ongoing regulatory review but believes that no regulatory intervention is required.

“At the heart of the problem is Sky’s strong position in the pay-TV market, with twice as many subscribers to pay TV as all other traditional pay-TV retailers put together,” said Laura Carstensen, who headed the commission probe. Sky supplies some other pay-TV companies with its movie channels, but the industry watchdog said that prices charged for the service are too high. Consumers are paying up to $98M a year too much to see films on television as result of Sky’s dominance, the commission said. Subscribers to Sky’s 12 movie channels pay roughly $60 a month.

The commission said that possible remedies include a restriction of the number of major studios from which Sky may license exclusive first-window rights, and restricting the nature of Sky’s deals. A final report is due early next year. UK analyst Peel Hunt told the UK web site Proactive Investors that despite the regulatory risks it is keeping its “buy” rating on the satellite broadcaster. “Although there is a long way to go before a decision is reached and a course of action proscribed, we suspect that the ultimate outcome may well be a wholesale ‘must-offer’ mechanism, similar to the live Premiership football rights requirement.”

If this happens, Hunt said that BSkyB likely will have to re-sell its rights to other pay-TV operators at a price set by the broadcasting and telecoms regulator Ofcom. “Movies and sport are the key reasons subscribers come to Sky, so this will be a blow to the business,” he said. “However, it is worth noting that Sky’s subscriber numbers remain strong more than a year after the Premiership ‘must-offer’ ruling, with football rights arguably a greater driver to subscribers than movies.”