Excess Profit:

Castiel · 8 Feb 2011 at 19:12

http://www.whathifi.com/News/Sky-Movies-under-fire-for-making-excess-profits/

Sky make 'excess profit' from it's movie channels apparently. Now can someone tell me what are 'excess' profits?

Surely profit is profit and if they can make as much as they can so what?

Biohazard · 8 Feb 2011 at 19:15

I think its the balance struck between profit and customer expectation.

Maybe even fairness depending on how you look at it?

If profits don't normalise in relation to investment, it could be hard to usher in newer services functions or technologies.

Could you argue that services 'depreciate' in value over time?

/'lefty' cap off

Dolph · 8 Feb 2011 at 19:18

When we get rid of a state controlled broadcaster funded by force first, then we can worry about someone who built up a successful business through taking risks...

I have a choice whether I contribute to Sky's profit, I don't have the same choice with regards to the BBC.

Redgie · 8 Feb 2011 at 19:19

It is pretty much explained in the article

?

Greenlizard0 · 8 Feb 2011 at 19:20

It's from the Competition commission, which I think is implying that because of their monopoly in that part of the market, they're over charging for broadcasting new movies such that their profits are excessive.

Dolph · 8 Feb 2011 at 19:22

Greenlizard0 said:
It's from the Competition commission, which I think is implying that because of their monopoly in that part of the market, they're over charging for broadcasting new movies such that their profits are excessive.

But sky only have that 'monopoly' (which isn't really at all, as there are plenty of ways to get TV without contributing to sky) because they took risks and invested massively to create a niche...

Greebo · 8 Feb 2011 at 19:22

Lack of competetion and an huge "unfair" profit margin?

In most small to medium businesses you are happy if you make 10%, 25% and you are very, very happy

Big plc's and FTSE 250 companies in the norm live off 3% to 10% profit.

Now if Sky are say making 500% profit compared to what the film costs to what they charge you, is that not viewed as excessive?

The problem is supply and demand. Presumably Sky make that excessive profit because people are prepared to pay £10 a month for what probably cost sky £1 per month per user.

Should it change? Well, capitalism says that the price will drop if deamnd drops or competetion increases so a lot of people would say leave it be.

However, the competition Commission doesn't see it that way especially if there is no alternative. Should a company be able to charge you a fortune if they are the only one which can deliver it? Probably not.

Imagine if water comapnanies were able to charge you £10,000 per year for water because you had not alternative?

Castiel · 8 Feb 2011 at 19:23

Biohazard said:
I think its the balance struck between profit and customer expectation.

Maybe even fairness depending on how you look at it?

If profits don't normalise in relation to investment, it could be hard to usher in newer services functions or technologies.

Could you argue that services 'depreciate' in value over time?

/'lefty' cap off

Fairness and capitalism......that doesn't sound right!

In Sky TV's case their services are forever moving forward with regard to technology and function, SKY HD and SKY3D being the latest incarnations, they are usually at the forefront of this.

Whether their service depreciates, again they are reinventing their service every so often so I doubt that can be laid at them either.

As for customer expectation, you have a choice, pay or not, there are other regulator enforced options now so in my humble opinion, if SKY can make money then who is too say what is excessive, how do you measure that?

Castiel · 8 Feb 2011 at 19:26

Greebo said:
Lack of competetion and an huge "unfair" profit margin?

In most small to medium businesses you are happy if you make 10%, 25% and you are very, very happy

Big plc's and FTSE 250 companies in the norm live off 3% to 10% profit.

Now if Sky are say making 500% profit compared to what the film costs to what they charge you, is that not viewed as excessive?

The problem is supply and demand. Presumably Sky make that excessive profit because people are prepared to pay £10 a month for what probably cost sky £1 per month per user.

Should it change? Well, capitalism says that the price will drop if deamnd drops or competetion increases so a lot of people would say leave it be.

However, the competition Commission doesn't see it that way especially if there is no alternative. Should a company be able to charge you a fortune if they are the only one which can deliver it? Probably not.

Imagine if water comapnanies were able to charge you £10,000 per year for water because you had not alternative?

I work for a large PLC and we work off a minimum 27% net profit on individual services, if it drops below that and there is no subsidy then that service is stopped.

There are alternatives to Sky which are enforced by the regulator, so what is excessive?

Greebo · 8 Feb 2011 at 19:26

Dolph said:
But sky only have that 'monopoly' (which isn't really at all, as there are plenty of ways to get TV without contributing to sky) because they took risks and invested massively to create a niche...

Thats the point of the article. The commission says they have had years of this profit which reflects their investment but that's enough.

And there are hundreds of thousands of people like us where sky is the only choice. Its either that or just 4, and yes I mean just 4, terrestoral channels.

Castiel · 8 Feb 2011 at 19:28

Greebo said:
Thats the point of the article. The commission says they have had years of this profit which reflects their investment but that's enough.

And there are hundreds of thousands of people like us where sky is the only choice. Its either that or just 4, and yes I mean just 4, terrestoral channels.

There are other options, other Satellite Freeview, Terrestrial Freeview, Virgin TV, BT Internet TV and so on.

Sky do not have a monopoly, far from it.

Dolph · 8 Feb 2011 at 19:28

Greebo said:
Thats the point of the article. The commission says they have had years of this profit which reflects their investment but that's enough.

And there are hundreds of thousands of people like us where sky is the only choice. Its either that or just 4, and yes I mean just 4, terrestoral channels.

So sky isn't the only choice then :confused:

Greebo · 8 Feb 2011 at 19:28

Castiel said:
I work for a large PLC and we work off a minimum 27% net profit on individual services, if it drops below that and there is no subsidy then that service is stopped.

There are alternatives to Sky which are enforced by the regulator, so what is excessive?

A good company and one of the exceptions then. Unless I am out of touch the last time I looked at the accounts of plc's we deal with, the net profit has been below 10%.

Of course if your turnover is £4 billion that still means you make £400 million in profit.

We are lucky as a small/medium company that our net profit is over 30%

Greebo · 8 Feb 2011 at 19:29

Dolph said:
So sky isn't the only choice then

It is as far as the extra channels goes. Either anologue 4 channel tv or sky. No other choices.

Biohazard · 8 Feb 2011 at 19:30

Greebo said:
It is as far as the extra channel goes. Either anologue 4 channel tv or sky. No other choices.

Not having a TV?

Greebo · 8 Feb 2011 at 19:31

Castiel said:
There are other options, other Satellite Freeview, Terrestrial Freeview, Virgin TV, BT Internet TV and so on.

Sky do not have a monopoly, far from it.

Nope, vast amounts of the country does not have Freeview, Virgin, Bt internet or anything else. Hell we won;t even got digital on the normal aerial until last in our area.

Greebo · 8 Feb 2011 at 19:31

Biohazard said:
Not having a TV?

Xordium · 8 Feb 2011 at 19:34

They are only miffed as that profit is being derived directly from the benefits system /ducks for cover

dowie · 8 Feb 2011 at 19:35

Castiel said:
There are other options, other Satellite Freeview, Terrestrial Freeview, Virgin TV, BT Internet TV and so on.

Sky do not have a monopoly, far from it.

They don't have a monopoly on TV in general though this was specifically re: movies - if they've got exclusive contracts with major studios then there is danger of a monopoly - with no real competition specifically in that area then
that is where the regulator steps in - they're not just getting involved for ***** and giggles.

Greenlizard0 · 8 Feb 2011 at 19:37

Dolph said:
But sky only have that 'monopoly' (which isn't really at all, as there are plenty of ways to get TV without contributing to sky) because they took risks and invested massively to create a niche...

It's about film movie channels? Also the fact that they get them earlier than any other broadcaster here.

As said above there are other services now that do this, I think one is from BT. Their initial investment's been paid off but seemingly Sky haven't reduced their prices.

I think that's the crux of the article, bit of a nothing story in my opinion as well. But the fact that there's a commission could imply there's something else afoot.

To be fair, choices aside, Sky's prices aren't cheap.