Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
TV Consultation, summarises the further representations that we have received and
provides a brief overview of further developments. We then consider the strength of
any competitive constraints on suppliers in this market, namely:
Background
� Competition from existing competitors.
� Competition from potential competitors.
� Countervailing buyer power (“CBP”).
The channels within the relevant market
5.75 As set out in section 4, we consider that the relevant market is the wholesale supply
of channels which include the first TV subscription window of movies produced or
licensed by any of the Major Film Production Groups 307 . The following channels that
are wholesaled by Sky lie within that relevant market: Premiere, Premiere +1,
Comedy, Family, Action/Thriller, Sci-Fi/Horror, Drama, Screen 1, Screen 2, Modern
Greats and Indie 308 , and HD versions of these channels. We consider that Disney
Cinemagic also lies within the relevant market since it broadcasts animated films in
the first pay TV window that were produced by Disney.
Our position in the Second Pay TV Consultation
5.76 We consulted on the conclusion that Sky had market power in the wholesale supply
of channels or packages of channels which include the first TV subscription window
of film content from the Major Hollywood Studios. Our view was that Sky held market
power and was likely to hold that position in the relevant market for the next three to
four years. By way of background, we based that conclusion on the following:
� We considered that Sky was the only supplier within the relevant market, giving
Sky 100% market share (in the Second Pay TV Consultation we did not identify
Disney Cinemagic as lying within the relevant market).
� Sky’s market share remained high even when we expanded our market definition
somewhat, to include for example pay-per-view (“PPV”) movies or DVD rental
subscription services.
� We believed that the bidding advantages that we set out in the context of the
wholesale supply of sport channels also applied to movie content. These meant
that Sky can afford to bid a larger amount than any other bidder for the studios’
rights. That, in conjunction with the staggered availability of rights, created a
significant barrier to entry.
307 Note that this differs from the definition adopted in the Second Pay TV Consultation, namely the
wholesale supply of channels or packages of channels which include the first TV subscription window
of film content from the Major Hollywood Studios. First, it includes a wider range of movies than just
those licensed by the Major Hollywood Studios. Second, it excludes other components of wholesale
bundles supplied with relevant movie channels.
308 The Sky channel Classics does not lie within the relevant market since it broadcasts less recent
films (i.e. films that are not within the first TV subscription window).
157