BSkyB risks losing its grip on the rights for premium pay-TV movies after a watchdog challenged the broadcaster's stranglehold on Hollywood films.
The Competition Commission said BSkyB's exclusive deals with six of the big studios over the rights to films when they are first shown on television restricted competition and meant higher prices and reduced choice and innovation for viewers.
BT and Virgin Media have led calls for the way the market is structured to be changed to allow them greater access.
In its provisional findings following a year-long inquiry, the commission said in future it may restrict the number of studios that BSkyB can sign exclusive deals with and also the nature of the rights it can sign so that services such as video on demand can be provided by other suppliers. It may also require Sky to offer any movie channel run by another group to its own subscribers on a wholesale basis.
Laura Carstensen, chairman of the investigation, said: "Sky has had control of recent movie content on pay TV for many years. 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.
"This provides Sky with a great advantage when it comes to bidding for movie rights, which no rival bidder has yet been able to overcome - and, if things stay as they are, we see no likely prospect of change," she added.
BSkyB noted the provisional ruling and said: "BSkyB continues to believe that no regulatory intervention is required and that consumers benefit from high levels of choice, value and innovation across a wide range of providers."
Around one third of the UK's 15 million pay-TV viewers are estimated to subscribe to Sky Movies. The commission said that recent movie content is important to many pay-TV subscribers and Sky's control of this content on pay TV enables it to attract more pay-TV subscribers than its rivals.
"Having more subscribers increases further its advantages when bidding in the next round for pay-TV movie rights, and so it goes on," the commission said.
It noted new developments in the market such as broadband internet distribution, but concluded that none of the these alternative sources are likely to affect Sky's ability to get first-view rights for major films in the foreseeable future. The final deadline for the report is August 3 next year, but the commission said it expects to make its final ruling before that date.