Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
[ � ]% [90-100%] 309 . This is well above the 50% threshold at which dominance
under a CA98 analysis can be presumed, in the absence of evidence to the contrary.
Disney accounted for the remaining [ � ]% [0-10%] share. This strongly suggests
that Disney Cinemagic is a weak constraint on Sky’s Core Premium Movie channels.
This is consistent with the characteristics of Disney Cinemagic. As discussed in
paragraphs 4.256, Disney Cinemagic only features a small number of first run movies
and the majority of its output is targeted at children, which suggests that it is not a
particularly close substitute for Sky Movies channels.
Out of market constraints
5.85 As explained in paragraph 4.377, we recognise that there is a moderate degree of
substitutability between Core Premium Movie channels and PPV movies, DVD rental
subscription packages and library films. On balance, we took the view that they do
not lie within the relevant market, but they nonetheless are moderately close
substitutes for Sky Movies channels.
5.86 We have thus considered the extent of the constraint imposed by these ‘out of
market’ products. In particular, we have calculated market shares as if this
moderately substitutable content were within the relevant market. 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.
5.87 First, we have calculated market shares taking into account three other ways in
which consumers can pay to watch movies: (i) PPV movies; (ii) online DVD rental
services (such as Lovefilm); and (iii) legal movie downloads (to rent or own). These
market shares were calculated based on revenues earned by these various
services 310 .
Figure 42 Wholesale market shares in 2008 including moderate ‘out of market’
constraints (calculated using revenue data)
Sky Disney Virgin
Media
Others
Including PPV [90-100]% [0-10]% [0-10]% [0-10]%
Including online DVD rental services [80-90]% [0-10]% [0-10]% [10-20]%
Including legal movie downloads [90-100]% [0-10]% [0-10]% [0-10]%
Including all of the above [80-90]% [0-10]% [0-10]% [10-20]%
Source: Ofcom calculations
5.88 Second, we have calculated market shares taking into account movies screened on
other channels. These market shares were calculated based on broadcasters’
309 If Sky’s wholesale revenues are calculated using the incremental wholesale price of Sky Movies
then Sky’s market share remains extremely high (around [ � ] [90-100%]). See Annex 8 for further
details.
310 In particular, we calculated these figures using the retail revenue generated from PPV movies,
online DVD rental packages and legal movie downloads, rather than the wholesale revenues
associated with these services. This is likely to overstate their wholesale market share.
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