Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Figure 33 Total audience for films on TV (not PPV) 1997 – 2007
Million views
Source: UK Film Council Year Book 2008, Figure 11.6
4.318 We acknowledge that the increasing availability of films either within basic tier
bundles or on FTA TV may in principle provide some competitive constraint on the
wholesale supply of Sky Movies channels. For example, Film4 which went FTA in
July 2006 and the Universal backed Picturebox which launched on various platforms
in 2006 – 2007, both show a variety of older films from the FTA or library window).
However the evidence does not point towards substitution from subscription channels
to basic and FTA channels – rather it points to an overall decline in movie viewing on
linear channels.
4.319 As regards Sky’s analysis of downgrading customers, we do not consider that this is
evidence that FTA movies are a substitute for premium movies. Instead, the
evidence could simply reflect that viewers who stop subscribing to premium movies
have an ongoing interest in watching movies, and now have more time to spend on
other activities (other than watching Sky Movies), including watching FTA movies or
other content 236 . It is not evident from this analysis that the availability of FTA movies
or other TV content caused these viewers to downgrade or made them more willing
to do so. Furthermore, the fact that downgraders’ overall television viewing increased
when they dropped Sky movies appears counter-intuitive. It would appear that these
viewers responded to having a smaller range of TV programming by watching more
TV. This apparently anomalous result leads us to doubt the reliability of Sky’s
analysis.
4.320 In summary there is no evidence that this downgrading was a pricing response, or
that FTA movies or other content should be included within the relevant market.
236 Sky Response of 1 June 2009 to Ofcom’s Second Pay TV Consultation “Additional comments on
Ofcom’s analysis of market definition and market power in the pay TV review” paragraphs 6.12 –
6.14. Sky argued that in order to count as switching in a market definition analysis, alternatives must
be relevant products in the sense of fulfilling similar consumer demands. It noted that if consumers
bought fewer magazines in response to a price rise, and spent the money saved on food, this would
not count as relevant switching. The example of consumers watching more FTA TV 3 years after
terminating their Sky Movies subscription is analogous to Sky’s example of magazines and food and
in the same way does not necessarily imply that the market should be broadened to include other
content.
120
3,500
3,000
2,500
2,000
1,500
1,000
500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Subscription
movie
channels
FTA and
basic tier
channels