Pay TV phase three document - Stakeholders - Ofcom

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Pay TV phase three document – non-confidential version
5.129 However, currently Sky only supplies its Core Premium Sports channels to itself and
retailers using cable as a distribution technology. As discussed in section 6, retailers
using IPTV and DTT as a distribution technology have been unable to reach an
agreement with Sky to retail Sky Sports. We thus consider that it is very unlikely that
retailers using a distribution technology other than cable will be able to acquire Sky’s
Core Premium Sports channels. This lack of access to these channels acts both as a
significant entry barrier and as a barrier to expansion for retailers (such as BT Vision
and Top UP TV) that currently do not retail Sky’s Core Premium Sports channels.
5.130 Moreover, we do not consider that it is plausible that a new entrant retailer would use
cable as a distribution technology. Virgin Media’s cable platform is currently closed
i.e. Virgin Media does not permit third party retailers on that platform. Moreover
establishing a new cable network would be time consuming and extremely costly.
5.131 In contrast, Setanta reached agreements with a number of retailers using a variety of
distribution technologies, and ESPN has announced its intention to do the same.
There thus seemed to be few barriers to acquiring access to Setanta Sports 1 (or an
ESPN equivalent in future) and this might allow new retailers to begin supplying retail
television bundles containing Core Premium Sports channels (as has previously
been the case for both BT Vision and Top Up TV).
5.132 However we consider that such potential entry would be unlikely to constrain Sky’s
retail prices for the supply of bundles containing Core Premium Sports Channels. As
explained in paragraphs 5.30 to 5.31 above and as demonstrated by the relative
wholesale market shares of Sky and Setanta, Setanta Sports 1 is less attractive to
final consumers than Sky Sports 1 and 2. The same logic is likely to apply to third
parties such as ESPN that acquire rights previously held by Setanta (such as the
Live FAPL Rights for the 2009/10 season onwards). This will be compounded by
Sky’s acquisition of 50% of the games Setanta previously broadcast from the
2010/11 FAPL season onwards. Accordingly, a new entrant that only retails bundles
including Setanta Sports 1 (or successor channels) is likely to exert a comparatively
weak constraint on Sky’s retail business. This view is confirmed by the negligible
market shares that BT Vision and Top Up TV (which have both entered the market by
retailing Setanta Sports 1) have been able to secure, as shown in Figure 44 and
Figure 45 above 325 .
Countervailing buyer power
5.133 Retail television bundles containing Core Premium Sports channels are supplied to
individual residential households. Individual households do not possess CBP to offset
any seller power that exists.
Conclusion on the ability to sustain retail prices appreciably above the competitive
level
5.134 Sky enjoys a high retail market share in the retail supply of bundles containing Core
Premium Sports channels. Indeed Sky’s market share is above the 50% threshold at
325 Moreover, as discussed in paragraphs 5.151 to 5.153 below, entry by retailers using DSat, IPTV or
DTT as a distribution technology is costly and it is not clear whether further event is actually likely.
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