Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
Figure 63 Sky’s costs by major cost category (2007/08)
Source: Sky’s 2008 Annual Report
9.147 The categories of cost that contribute to wholesale channel costs are primarily:
296
Subscriber
management
16%
Administration
12%
Marketing
18%
Tran smission
13%
Sky Sports
programming
22%
Sky Movies
programming
7%
Other programming
12%
� Programming costs: rights fees payable to sports bodies and movie studios for
content that is included in Sky’s sports and movie channels respectively.
� Marketing costs: expenses that would be expected in part to benefit Sky’s Core
Premium wholesale customers, which are therefore legitimately recovered
through cost-plus charges for Core Premium channels.
� Transmission costs: broadly defined, including certain technology development
costs which we regard as a common cost across Sky’s operations, and the
operation of portals which would be expected to benefit all retailers of Sky’s Core
Premium channels.
� Administration costs: the costs of channel production and the operations of Sky
Sports and Sky Movies channels which are relevant in their entirety to the
wholesale of these channels, and the costs of overheads which are relevant to
Sky’s entire operations, which in part should be allocated to Sky’s Core Premium
wholesale activities.
9.148 We have drawn on a number of different data sources for our cost-plus calculations.
In particular for the costs of sports rights acquisition, which make up the majority of
the wholesale sports channel costs, we have used data from an independent expert
publication, cross-checked against data from Sky where available 544 . In the case of
movie channels, we have derived Sky’s costs of rights directly from Sky’s movie
contracts.
544 European TV and Sports Rights, published by SportBusiness Group (2008). This publication sets
out expected rights fees over time. We cross-checked these forecasts against actual data for 2007/08
provided by Sky, and identified no significant discrepancies.