Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Overview of the further representations received on the approach to assessing
wholesale market power
5.21 As discussed in section 4, the Four Parties and [ � ] considered that Ofcom erred in
focussing on Sky’s live FAPL coverage and argued that Sky derives its market power
in the supply of premium sports channels by aggregating a portfolio consisting of a
wide variety of sports content. Similarly, the BBC questioned whether our market
definition was too narrow. The FAPL also argued that the relevant market was wider
albeit for a different reason, namely that there is a range of substitutable content.
These arguments are set out and considered in section 4 and section 8.
5.22 Sky considered that the Live FAPL Rights are “contestable”.
5.23 The FAPL disagreed that there are barriers to acquiring the Live FAPL Rights. The
FAPL referred to the European Commission’s intervention and stated that the
European Commission has concluded that there are no longer any grounds for action
and that competition in downstream markets is protected. The FAPL also disagreed
with the view that the staggered availability of sports rights is a barrier to entry. It
considered that the acquisition of a series of rights over time by Setanta is evidence
that the staggered availability of rights actually facilities entry.
5.24 [ � ] stated that Sky is able to out-bid competitors for the FAPL rights, citing the
same factors that we identified in the Second Pay TV Consultation. [ � ] provided no
further evidence in support of its position. [ � ] also claimed that Sky’s advantages
when bidding for rights represent a “toe-hold effect” that are augmented by features
of the rights sale process. [ � ] also considered that Sky’s conduct (specifically [ �
] and the margins earned by Virgin Media on bundles including Sky Sports) provided
evidence that Sky is dominant.
5.25 The BBC agreed with Ofcom’s assessment of market power but provided no further
evidence.
5.26 Freesat agreed that Sky was dominant, as reflected by Sky’s high market shares.
Freesat stated that Setanta was unlikely to acquire additional packages of Live FAPL
rights since Sky was vertically integrated and has an incentive to retain those rights.
Freesat provided no further evidence in support of its position.
Further developments since the Second Pay TV Consultation
5.27 As explained in paragraph 2.54, since the publication of the Second Pay TV
Consultation, the FAPL has sold the Live FAPL Rights for the 2010/11 to 2012/13
seasons. Sky won the rights to five of the six available packages (the maximum
available to a single bidder). Setanta won the rights to the remaining package. We
have also obtained details of the amounts bid in the 2006 and 2009 sales processes.
As we set out in paragraph 2.54, Setanta has now lost its rights to broadcast live
FAPL matches from the 2009/10 season onwards and gone into administration, and
those rights have now been acquired by ESPN.
Existing competitors
Existing competitors within the relevant market
5.28 As explained above, there are two firms currently active in the relevant market: Sky
and Setanta (although Setanta is set to be replaced by ESPN). As explained in
Annex 8 we consider that Setanta Sports 1 is a substitute for Sky Sports 1 and 2.
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