Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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� Consumers also value not having to pay each time they watch a film, and the
convenience of not having to rent a DVD (respectively cited by 63% and 65% of
consumers as either ‘must have’ or ‘nice to have’ features).
4.394 These findings, and in particular, the convenience aspect of having a wide range of
films available, at home, and free at the point of consumption, suggests that for many
consumers DVD rental, pay per view, and seeing films at the cinema may not provide
particularly effective substitutes. Online subscription DVD rental services may appeal
to those consumers who value the convenience of paying monthly or not having to go
to a DVD shop.
Responses to our consultation
4.395 Sky argued that our analysis focused on the preferences of average subscribers,
rather than those most likely to switch in response to a price rise (‘marginal
subscribers’).
Our current view
4.396 As we set out in paragraphs 4.282 to 4.285 we analysed preferences of ‘price
sensitive’ subscribers and gathered further evidence from firms within the market and
analysis of audience data on Sky movies channels. As with our assessment of the
wholesale supply of Core Premium Movie channels we consider subscription access
to new movies from the pay TV window to be the key characteristics of premium
movie channels.
Evidence of the constraint from DVDs
Our position in the First Pay TV Consultation
4.397 We assessed changes in prices and demand for Sky Movies and DVDs. We found
that between 2001 and 2006 the retail price of DVDs has fallen in real terms by 43%
while expenditure on retail DVDs has tripled over the period 266 .
4.398 As stated above, it is difficult to draw firm conclusions from such data. However, we
noted that the price of Sky Movies had grown at approximately the same rate as that
of Sky Sports, despite what appeared to be a greater array of potential substitutes. In
particular, the growth in popularity of renting and purchasing DVDs did not appear to
have had a constraining impact on the price of Sky Movies.
Responses to our consultation
4.399 As we set out above 267 Sky believed that DVD retail and rentals were a strong
constraint on the retailing of Sky Movies channels. In response to our second
consultation it stated that the reduction in time between the cinema release and DVD
rental release meant that the pay TV window was becoming less valuable.
266 Source: Screen Digest, see annex 11 to our First Pay TV Consultation.
267 See paragraph 4.278 and 4.286.