Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
conclusions on market power do not depend on this conclusion, since expanding our
market definition to include online DVD rentals does not materially change our
assessment of market power.
4.343 For the reasons stated in paragraphs 4.157 to 4.160 we do not believe that our
choice of price deflator, the start and end dates of the analysis, or our assessment of
the use of discounts change our conclusion that the inflation adjusted price for Sky
Movies had been broadly constant since 2002 and the price of Sky Sports and
Movies Mix had been broadly constant since 2004.
4.344 Our view on the margin of prices over input costs remains as before. There has been
[ � ] in programming costs for Sky Movies channels without any significant
reduction in retail prices. This does not suggest to us a strong competitive constraint
on Sky’s pricing of its movie channels.
4.345 Overall, while we recognise that there has been a reduction in the number of
subscribers to Sky Movies over the past few years, we do not believe this provides
evidence that Sky’s premium movies channels are constrained to competitive levels.
In particular:
� Demand for the most likely close substitutes to premium movie channels –
namely movies shown on other channels and DVD rentals – has also declined.
� Real prices have remained broadly constant despite sharp falls in input costs.
The potential constraint from content downloaded over the internet
Our position in our Second Pay TV Consultation
4.346 In our Second Pay TV Consultation we considered the constraint from content
downloaded over the internet.
4.347 In response to our First Pay TV Consultation Sky said that we had failed to
appreciate the importance of content delivered on the internet. In particular this
meant our assessment was insufficiently forward looking. For example, Sky cited the
popularity of the downloadable content offered by existing broadcasters, including the
BBC’s iPlayer, Channel 4’s 4OD service, ITV.com, and Sky’s own online service
(now called Sky Player) 248 .
4.348 We agreed that downloading content to watch from the internet offers consumers a
wide range of content that can be accessed relatively easily and viewed at their
convenience.
4.349 We also commissioned a survey to understand the current level of consumption of
content delivered via the internet. Our survey indicated that relatively few consumers
currently download content, and that the constraint is therefore relatively weak. For
example, only 13% of Sky’s premium subscribers had downloaded content from the
internet in the last month.
4.350 [ � ] 249 [ � ].
248 Sky response to Ofcom’s December 2007 consultation Annex 6, appendix 1.
249 Annex 21 Sky response to Ofcom request for information of 29 th May.
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