The Competition Commission has changed a ruling on BSkyB’s dominance of the pay-TV film market thanks to the growth of digital services such as LOVEFiLM and Netflix.

In an abrupt u-turn, the CC said that Sky Movies no longer provides Sky with an advantage over its pay-TV rivals.

It reversed a ruling from last year which found that the satellite broadcaster’s deals with major Hollywood studios effectively gave it a monopoly on the market and caused higher prices for consumers.

The CC’s revised report states that it had previously:

…overstated the importance consumers attach to being able to see recent movies on a pay-TV movie service.An effect of the availability of the over-the-top [digital] services of LOVEFiLM and Netflix is to reduce the number of prospective subscribers to traditional pay-TV.

On the face of it, Sky has been extremely lucky to escape punishment when it has done nothing to alter its business model since the previous ruling. Had the CC rubber-stamped its previous report Sky may have been forced to restrict its deals with Hollywood studios or offer rival film channels on its platform.

Instead, innovation by other digital providers has changed the way consumers access content and earned Sky a reprieve.

In particular, Netflix launched in the UK in January 2012 and, since the original provisional findings, LOVEFiLM has enhanced significantly its internet-distributed movie offering.

Both these digital companies have been snapping up content deals with production companies, including those responsible for teen favourites Twilight and The Hunger Games.

Meanwhile, YouTube has also started producing original content and recently signed a deal to distribute Disney movies in the UK.

And bizarrely, the CC said that BSkyB’s own online service – set for launch this summer – also reduces Sky Movies’ dominance.

So while competitors such as Virgin Media may not like it, it seems that digital media may have actually saved Rupert Murdoch’s bacon on this occasion.