Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
5.162 First, we have calculated retail market shares taking into account three other ways in
which consumers can pay to watch movies: (i) PPV movies; (ii) online DVD rental
services; and (iii) legal movie downloads (to rent or own). These were calculated
using the retail revenue that Sky and Virgin Media earn from the supply of bundles
containing Core Premium Movie channels as well as the revenues generated from
the various ‘out of market’ products. Note that Sky’s market shares will tend to be
higher than in the corresponding wholesale calculations set out in Figure 42 above
because, at the retail level, we are also taking into account Sky’s revenue from the
other (non-movie) components of Sky’s retail television bundles including Core
Premium Sports channels.
Figure 47 Market shares in the retail supply of bundles including Core Premium
Movie channels and various moderate ‘out of market’ constraints (calculated using
revenue data)
Source: Ofcom calculations
5.163 Second, in Figure 43 above we presented wholesale market shares based on
broadcasters’ expenditure on rights to movies (including less recent films). This
measure takes into account movies screened on other channels. We have
recalculated these figures assuming that the wholesale shares attributable to Sky
Movies and basic channels are split between Virgin Media and Sky according to the
proportion set out in Figure 46 above. Note that this measure does not include other
components of retail bundles such as basic channels containing no movies. However
it does shed light on the strength of different retail level suppliers of channels
including movies.
Figure 48 Retail market shares in 2008 including moderate ‘out of market’
constraints (calculated using expenditure on rights to movies)
Source: Ofcom calculations
5.164 Taking moderate ‘out of market’ substitutes into account, Sky still possesses a
relatively high market share, although not as high as under our favoured market
definition. Note, however, as explained in paragraph 5.89 above, movies broadcast
on free to air channels are likely to be a comparatively weaker constraint than
services such as PPV and online DVD rentals because they are less recent.
5.165 As noted in paragraph 5.91 above, Sky argued that focusing on putative market
shares in this way understates the extent of the competitive constraints on its
channels. We address Sky’s argument in paragraph 5.93 above.
176
Sky Virgin
Media
Others
Including PPV [80-90]% [10-20]% [0-10]%
Including PPV and online DVD rental services [80-90]% [0-10]% [0-10]%
Including legal movie downloads [80-90]% [0-10]% [0-10]%
Including all of the above [80-90]% [0-10]% [0-10]%
Sky Virgin
Media
BBC ITV Channel 4 Channel 5
[40-50]% [0-10]% [�]% [�]% [�]% [�]%