Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
� Second, consider whether Sky has the ability to charge a retail margin that is
appreciably above the competitive level; and
� Third, set out some factors that are relevant to the extent of retail market
competition absent the exercise of wholesale market power.
The ability to sustain retail prices appreciably above the competitive level
5.122 In the First Pay TV Consultation we considered whether Sky had the ability to sustain
retail prices appreciably above the competitive level and concluded that it was likely
that Sky was dominant in the “retailing of premium sports packages” (Annex 13,
paragraph 5.38).
Current retail market shares
5.123 We have calculated market shares as a proportion of the retail revenues earned by
Sky, Virgin Media, Setanta, Top Up TV and BT Vision from the supply of retail
television bundles containing Core Premium Sports channels. These are summarised
in Figure 44 below (in this figure, we have aggregated the negligible retail market
shares of Setanta, Top Up TV and BT Vision). These market shares were calculated
based on the revenue earned from retail television bundles containing Core Premium
Sports channels. We have included the entire revenue earned from a retail television
bundle, including any mandatory non-television components 324 . This has the effect of
depressing the market share of retailers such as Top Up TV and Setanta that supply
smaller bundles for a lower price.
Figure 44 Market shares in the supply of retail television bundles containing
Core Premium Sports channels (calculated on a revenue basis)
Sky Virgin Media Others
2H 2007 [70-80]% [20-30]% [0-10]%
1H 2008 [70-80]% [20-30]% [0-10]%
1H 2008 [70-80]% [20-30]% [0-10]%
Source: Ofcom calculations
5.124 Sky accounts for a very high proportion of the revenue earned from the supply of
retail television bundles containing Core Premium Sports channels, with Virgin Media
being the only other retailer with a material market share.
324 For example, Setanta Sports 1 is available on DSat as a bundle with other Setanta Sports
channels for £12.99/month. We have used the entire retail revenue from that bundle. Similarly, where
a household subscribes to Sky’s sports mix package and one basic mix (for a price of £35.50/month)
we have used the entire retail price of that bundle. We have not included revenue from certain addons
to this package such as multiroom. A household that subscribes to Virgin Media “M” television
package plus Sky’s dual sports package ostensibly receives the basic “M” package for ‘free’ whilst
paying £30/month for the additional sports channels. However that package is only available if the
household purchases a phone line from Virgin Media for £11 month. Since that phone line is a
mandatory component of the television bundle we have used the overall bundle price of £41/month
when calculating retail market shares.
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