Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
5.29 As discussed above, we are assessing Sky’s market power against the dominance
threshold. In the context of that threshold, while market shares are not conclusive
evidence, the ECJ has stated that dominance can be presumed in the absence of
evidence to the contrary if an undertaking has a market share persistently above
50% 280 . The OFT Market Power Guidelines state that it is generally unlikely that an
undertaking will be individually dominant if its share of the relevant market is below
40%, although there may be exceptions (paragraph 2.12).
5.30 We have calculated market shares as a proportion of the revenues earned by Sky
and Setanta from the wholesale supply of Core Premium Sports channels. This
updates the calculations in the Second Pay TV Consultation, in particular to reflect
more recent data. Setanta attracted a significant number of additional subscribers
once it began broadcasting live FAPL matches in August 2007. That initial rise meant
that Setanta’s share of revenues was around [ � ] [0-10%] in the second half of
2007. Setanta’s share of revenues continued to grow and had increased to around [
� ] [10-20%] in the second half of 2008. As a result, Sky’s share of revenues has
thus fallen somewhat in recent years. However Sky’s market share in the second half
of 2008 was still very high (around [ � ] [80-90%]) and remained well above the
50% threshold at which dominance can be presumed, in the absence of evidence to
the contrary. These figures include self-supply of channels to Sky’s and Setanta’s
retail businesses 281 .
5.31 Moreover, looking forward, Setanta Sports will no longer be broadcasting live FAPL
matches. and has gone into administration.. From the 2010/11 FAPL season
onwards ESPN (which has reportedly acquired the rights previously held by Setanta)
will screen 50% fewer live FAPL matches than Setanta did in 2007/08 and 2008/09,
since Sky won the rights to 23 of the games previously broadcast by Setanta. As a
result, Sky’s market share will probably rise 282 . This evidence suggests that
constraints on Sky may be weaker from mid-2010 onwards.
Out of market constraints
5.32 As explained in paragraph 4.72 in section 4, similar sports events to those broadcast
on Sky Sports 1 are also screened on other channels, including free to air channels.
In section 4 we weighed up whether various channels are sufficiently close
substitutes to lie within the relevant market. On balance, we took the view that only
Sky Sports 1 and 2 and Setanta Sports 1 lay within the relevant market, but we
280 Case C62/86 AKZO Chemie BV v Commission [1991] ECR I-3359.
281 Sky Sports and Setanta Sports 1 are not only sold on a stand-alone basis e.g. Sky Sports is also
bundled with Sky’s movie channels and Setanta Sports 1 is bundled with other Setanta Sports
channels. Sky’s market share depends on how much of the wholesale price of bundles containing
Sky’s movie channels is attributed to Sky Sports 1 and 2. If Sky’s wholesale revenues are calculated
using the incremental wholesale price of Sky Sports then Sky’s market share remains high (around [
� ] [70-80%] in the second half of 2008). See Annex 8 for further details.
282 First, it is plausible that the wholesale price charged by Setanta will fall, given the loss of FAPL
content from its channels. Second, it is plausible that Setanta will attract fewer subscribers than it
does at present. For example, when Setanta began screening live FAPL matches its subscriber
numbers increased from under 200,000 prior to 31 May 2007 to over 700,000 by 30 November 2007
(Source: Annex 1 of Setanta’s response dated 15 April 2009 to Ofcom’s information request response
dated 20 March 2009). A material share of these subscribers may leave once Setanta screens 50%
fewer live FAPL matches.
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