Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
5.92 We recognise that Sky’s market share is declining. However, this decline is from a
very high level. Accordingly, while the evidence presented by Sky suggests that the
intensity of competitive constraints may have increased in recent years, this does not
imply that Sky no longer has market power, or that it is no longer dominant.
5.93 We also accept that looking at market shares alone might not be a reliable guide to
market power 313 . However, we nonetheless consider that the high market shares set
out above, in conjunction with the evidence on the extent of substitutability presented
in section 4 of the main document, indicate that existing competitors only impose a
weak constraint on Sky’s movies channels. First, the moderate substitutes set out
above lie outside of the relevant market (for the reasons set out in section 4, we do
not consider that Sky’s evidence justifies the inclusion of these products within the
relevant market). Accordingly the use of market shares will tend to overstate the
extent of the competitive constraint exerted by these products, rather than understate
it. Second, we recognise that these market share figures do not reflect the
competitive constraint exerted by more remote ‘out of market’ substitutes. However
we do not consider that this is a sufficiently borderline case for the effect of more
remote substitutes to alter our conclusion.
5.94 Moreover, as set out in paragraph 4.370, the [ � ]. As noted in paragraph 4.371, this
is consistent with the view that Sky’s wholesale prices are not constrained to
competitive levels.
Conclusion on existing competitors
5.95 Sky’s very high market share indicates that it holds a position of market power. Under
a CA98 analysis it would create a (rebuttable) presumption that it enjoys a dominant
position. If this share is retained over the next three to four years, we would expect
any dominance to be retained over that period. Our conclusions take into account the
constraint imposed by ‘out of market’ products. Under alternative market definitions
that include moderate substitutes Sky’s market share remains above the 50%
threshold that the ECJ has stated is associated with a presumption of dominance (in
the absence of evidence to the contrary). Moreover we recognise that these
alternative market share figures will overstate the strength of the competitive
constraint exercised by these ‘out of market’ products and thus understate the extent
of Sky’s market power.
Potential competitors: barriers to entry and expansion
5.96 In order to enter this market it is necessary to acquire the rights to the first TV
subscription window of movies produced or licensed by the Major Film Production
Groups (the “Movie Rights”) 314 .
5.97 Our analysis thus focuses on whether there are obstacles to acquiring the Movie
Rights. Below we explain:
313 OFT Market Power Guidelines, paragraph 4.3.
314 As explained in paragraphs 4.323 to 4.324, a channel which includes the first TV subscription
window of movies produced or licensed by any of the Major Film Production Groups would lie within
the relevant market regardless of whether it is a linear channel or a subscription VoD channel.
Accordingly, both the linear rights and the subscription VoD rights fall within the definition of the Movie
Rights. The pay per view rights do not allow entry into this relevant market and are thus excluded
from the definition of the Movie Rights.
161