Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
recognised that channels outside of the relevant market nonetheless exerted a
competitive constraint to a degree.
5.33 We have thus considered the extent of the constraint imposed by ‘out of market’
products. In particular, we have calculated market shares as if moderate substitutes
for Sky Sports 1 and 2 were within the relevant market. We have taken into account
leading events in the main sports broadcast on Sky Sports 1 and 2 (namely football,
cricket, tennis, golf, rugby union and rugby league). We have not included other wellknown
sports such as the Olympics or Formula One motorsports since we believe
that they are poor substitutes for the events broadcast on Sky Sports 1 and 2. These
market shares provide an upper estimate for the strength of the competitive
constraint that may be exercised by products that lie somewhat outside of the
relevant market but that may nonetheless act as (imperfect) substitutes 283 .
5.34 We have calculated market shares that include moderate ‘out of market’ substitutes
based on the price of the rights of leading events in the six sports listed in the
previous paragraph 284 . While there are a number of gaps in the underlying data, we
do have data on the most valuable sporting events (including FAPL matches) and we
believe that the broad results are informative. These alternative market share figures
are set out in Figure 39 below. This shows that in 2008 Sky accounted for
approximately [ � ]% [60-70%] of the expenditure on rights on leading football,
cricket, tennis, golf, rugby union and rugby league events.
Figure 39 Wholesale market shares in 2008 including ‘out of market’ constraints
(calculated using expenditure on relevant sporting events)
Sky Setanta BBC ITV Other
[60-70]% [10-20]% [0-10]% [10-20]% [0-10]%
Source: Ofcom calculations
5.35 We recognise that, in the case of listed events, calculating market shares using rights
prices is likely to understate the strength of free to air channels’ competitive position
(the restrictions on broadcasting these events exclusively on pay TV are likely to
lower the price of the rights to listed events). However, the effect on the market
shares presented above is unlikely to be large given the relatively small number of
listed events that are relevant to this calculation 285 . We thus consider that Sky enjoys
a very high market share, even if moderate ‘out of market’ substitutes are taken into
283 We previously considered the impact of including other football matches on the market definition
set out in the Second Pay TV Consultation in paragraphs 2.27-2.36 of Annex 7. That analysis has
been updated to reflect the changes in this document to the market definition.
284 Direct assessment of revenues is complicated by the challenge of disaggregating advertising
revenues for the relevant matches, so we have not used this measure. Unlike the Second Pay TV
Consultation, we have not used audience figures to calculated market shares including ‘out of market’
constraints. This measure has limited accuracy (comparing viewers between free to air and pay TV
channels is imperfect since free to air channels will attract viewers with only a weak preference for the
event in question) and thus we considered that recalculation on this basis would not add material
value to our analysis.
285 The relevant “Group A” listed events are the FA Cup Final, the Wimbledon Tennis Finals, the
Rugby League Challenge Cup Final and the European Football Championship Finals.
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