Sky kicks back

Every year hoards of outraged licensees contact The Publican declaring they are cancelling their Sky contract because of price hikes.

This year they rang the news desk after Sky's basic subscription was increased by 18 per cent. Then they called after receiving their latest bills for Premiership Plus - some licensees' fees increased by over 400 per cent.

Licensees asked The Publican to find out why. In an exclusive interview with Iain Holden, director of Sky's Business Division (pictured)​, Michelle Perrett asked him to explain Sky's policy towards the trade.

Iain Holden has been head of Sky's business division for just over 11 years. He was brought in to set up the commercial division of the company when Sky realised the financial potential of charging pubs and clubs to show sport. When the first commercial contract to pubs was launched in August 1993 there was a flat rate charge of £30 a month.

Licensees have expressed concern about the raft of price increases they have faced since then and many believe they have been easy pickings for the satellite giant.

But Mr Holden refutes this claim. He said one of the myths was that when Sky started the commercial contract it deliberately offered pubs a very low price to encourage licensees to take up the service, then hiked up the prices afterwards.

Despite the considerable amount of complaints levelled at Sky about the pricing structure, which is charged by rateable value, Mr Holden claims this method of pricing was recommended by the Licensed Victuallers Associations (LVAs) which sought a fairer pricing structure.

"In the end the idea came from Phil Dixon, who was Midlands LVA chairman - it was his suggestion to use rateable value," says Mr Holden. "Over the years we have expanded those bands to make it fairer and broader as the market has grown.

"What we have is a pricing structure that actually has the small guy paying less and the big guy more."

However, a burning issue with licensees is the amount they are being charged to show Sky sports in their pubs. Huge price hikes on the basic package - 22 per cent last year - put the recent increases at well above the rate of inflation.

Mr Holden argues that this is based on market pressures including the price Sky has to pay the Premier League for three years' rights - £1.2bn - plus the value of the package to the market.

"More than four million people are watching Sky every week in pubs and clubs which often exceeds the domestic audience for Premiership matches. If those four million were spending say £10 a visit, then the industry is making £40m a week as a direct result."

But how can it be right for licensees who have been paying £400 for Premiership Plus to now have to pay £1,800? How can that sort of pricing structure be fair?

He says the price increases are justified because of the added value Sky affords licensees, including the extra Saturday football and increase in available games. "It's a different product," he argues. "At the end of the day you don't have to have it as part of your subscription. You choose to have it."

A recent poll on thePublican.com revealed that as many as two in three licensees are planning to drop Sky's pay-per-view package following the price rises. According to Mr Holden, subscriptions are increasing among licensed premises. The latest survey by Continental Research shows around 35,000 bars show Sky and the in-pub weekly audience has grown from 3.3 million visits last season to just over 4.9 million visits so far this season.

Sky's future policy is to offer the satellite channels to all types of premises, both domestic and commercial. But Mr Holden says there is no policy for giving preference to domestic customers while forcing pubs out of the market. "We recognise and understand that people have a view when prices go up to this extent. But we are about trying to offer value," he adds."We are creating an entertainment factor that helps pubs compete with all other entertainment factors out there."

Trade associations - and in particular the Association of Licensed Multiple Retailers - have been dogging Sky, demanding an Office of Fair Trading investigation.

"We have not got a monopoly and the OFT has basically stated that," argues Mr Holden. "Effectively we have exclusive rights to Premiership football, but not to football generally. We do not operate a monopoly within sport."

So what of future relations between Sky and licensees? He believes the product will continue to drive more and more people into pubs to watch live sport.

"After all, people are not keeping Sky because they are losing money," points out Mr Holden.

The rise and rise of Sky​

• July 2004:​ Licensees threaten to drop Sky as Premiership Plus prices are increased
• June 2004:​ Sky hikes fees by 18 per cent
• May 2004:​ Sky retains Premiership monopoly for next three years as terrestrial TV stations fail to meet price in auction
• April 2004:​ The Office of Fair Trading (OFT) closes investigation into Sky's pricing policy
• Dec 2003:​ EC brokers deal with Premier League for eight games to be shown live on terrestrial TV from next season
• Aug 2003:​ Association of Licensed Multiple Retailers demands OFT probe into prices
• Aug 2003:​ Sky agrees to pay £1.02bn for all Premier League football coverage until May 2007
• July 2003:​ Sky hikes fees by up to 22 per cent.

Have your say​

Do you have any views on what Mr Holden says? Let us know. Contact zvpuryyrc@gurchoyvpna.pbz​