Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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expenditure on rights to movies, including less recent films such as library films 311 .
These figures do not include Disney Cinemagic.
Figure 43 Wholesale market shares including moderate ‘out of market’
constraints (calculated using expenditure on rights to movies)
Source: Ofcom calculations
Sky BBC ITV Channel
4
Channel
5
Basic
channels
2007 [50-60]% [�]% [�]% [�]% [�]% [�]%
2008 [50-60]% [�]% [�]% [�]% [�]% [�]%
5.89 Sky’s market shares taking into account moderate ‘out of market’ substitutes remain
high. Sky has a market share of [ � ]% [80-90%] if PPV movies, DVD rental
subscription packages and legal movie downloads are taken into account. Sky also
has a market share of [ � ] [50-60%] if library films are taken into account. Based on
these market share figures, movies broadcast on free to air channels would appear
to impose a stronger constraint on Sky Movies than that imposed by PPV movies,
online DVD rentals and movie downloads. However, as explained in paragraph
4.318, we consider that the characteristics of PPV movies, online DVD rentals and
movie downloads are closer to those of Sky Movies because these services allow
access to more recent films (whereas, in contrast, movies broadcast on FTA
channels tend to be older).
5.90 As explained above, while we have calculated alternative market shares including
moderate substitutes for Core Premium Movie channels, we have not carried out this
calculation including more remote substitutes. In particular, although we have
included online DVD rentals in the above calculation, we have not included DVD
retail sales. In its 1 June 2009 submission Sky asserted that this is inconsistent as
there is no difference in the strength of our reasoning on the extent to which these
products are substitutes. We do not agree. We recognise that if DVD retail sales
were included in the relevant market then Sky would have a fairly low market share
(approximately [ � ] [10-20%]) 312 . However we do not place significant weight on
this figure. This is because DVD sales are a more remote substitute for Core
Premium Movie channels, as evidenced by their very different characteristics and the
pattern of retail price changes (see paragraphs 4.331 to 4.335).
5.91 Sky argued that focusing on putative market shares understates the extent of the
competitive constraints on its channels. As discussed in section 4, Sky provided
material to support its argument that its Sky Movies channels are constrained. For
example, Sky set out evidence that the number of subscribers to Sky Movies had
fallen as has the real price.
311 Use of this proxy for the attractiveness of films avoids the difficulties in identifying the revenue
attributable to movies for free to air broadcasters or broadcasters for whom movies is only a small
proportion of their output.
312
DVD retail sales in 2008 were £2.27bn. Source: BVA Yearbook 2009, British Video Association,
page 28.