Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Figure 35 Total value of DVD rentals
Source: British Video Association Year Book 2008
4.338 The chart shows a very similar overall pattern to the change in demand for Sky’s
premium movie channels, with a decline since 2004, although the growth from 2000
to 2004 is less marked. It also suggests that while there has been significant growth
in the volume of DVD rental subscription packages, this has been at the expense of
over-the-counter rentals. The chart – when read in conjunction with Figure 27 above
– does not appear to suggest a strong degree of substitution between Sky Movies
and DVD rentals.
4.339 This reflects the characteristics of the products. We accept that over-the-counter
DVD rental services may be closer substitutes to Sky Movies packages than DVD
sales, since they provide consumers with a similarly wide choice of films, to be
viewed on a one-off basis. However, these rental services do not share other product
characteristics with Sky Movies packages, such as the convenience with which films
can be chosen, and the certainty of a fixed monthly subscription.
4.340 We gathered evidence from Lovefilm, the biggest online DVD rental firm, on its view
of its close competitors. It indicated that it thought it competed with a range of other
movie formats:
124
£ million
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007
“[ � ]” 247 .
4.341 We consider that online subscription rental models may be an even closer substitute
to Sky Movies packages, since they provide the same certainty of a fixed monthly
subscription, as well as a convenient means of choosing films. However they do not
provide the same degree of convenience as a pay TV service, since no matter how
straightforward the ordering process is, a consumer cannot view a movie until it has
been delivered in the post. Consumers therefore need to be willing to plan their
viewing several days in advance to be able to make effective use of such a service.
4.342 Our view is therefore that while online DVD rentals are a closer substitute to Sky
Movies packages than DVD sales, they are not likely to be in the same market. Our
247 Lovefilm response to Ofcom information request of 20 March 2009.
Over-the-counter
Subscription