Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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addition to (rather than instead of) Sky Sports. Furthermore, they noted that Sky
Sports packages had increased in price after Setanta Sports began retailing FAPL
matches in August 2007, whereas Setanta Sports had reduced in price 177 . They
thought this suggested that although Setanta Sports’ pricing might be constrained by
Sky Sports, the constraint could be asymmetric: Setanta Sports does not provide a
competitive constraint on Sky Sports.
Our current view
4.227 As noted above, the focus of our Second Pay TV Consultation was on wholesale
markets, and we did not formally seek to define retail markets. However, in the light
of the comments of respondents to that consultation, we now assess retail markets
for the provision of packages including Core Premium sports channels. The key
question for our analysis is whether FTA content or basic tier content is likely to
constrain a monopolist retailer of premium sports channels.
4.228 We recognise that premium sports channels are retailed in wider bundles containing
basic tier channels or movie channels, radio stations and indeed products such as
phone or broadband packages. When assessing the constraints on premium sports
channel retailers we consider the constraint on the premium element of the bundle.
Our analysis therefore identifies products that subscribers to premium sports
channels might substitute away to.
4.229 As with our assessment of wholesale markets we consider:
� Demand side substitution
o Consumer response to price rises
o Evidence of consumer preferences, product characteristics, and the constraint
from FTA.
� Supply side substitution.
� Summary of conclusions.
Demand side substitution
Consumer response to price rises
Our position in the First Pay TV Consultation
4.230 In our First Pay TV Consultation we reported our survey evidence on consumers’
stated response to hypothetical price rises. The evidence suggested that although
large numbers of subscribers might switch or change their subscription in response
to a price rise, many chose to keep the sports element of the package. We stated
that such responses might be subject to ‘stated preference bias’, so they should be
interpreted with caution.
177 Joint Top Up TV and Setanta response, paragraph 3.4. Sky increased the prices of its premium
sports packages by £1 (about 4%) on 1 st September 2007; Setanta reduced its price by £5 to £9.99
on DSat in August 2007.