Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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Sky’s Core Premium channels and that there is no evidence to suggest other
operators are any less interested in obtaining Sky’s channels.
10.31 Most importantly, consumers would be able to make choices based both on their
content preferences and their platform preferences.
10.32 As explained in section 7, the most obvious manifestation of reduced consumer
choice is the restricted availability of Sky’s premium content on other platforms. The
fact that consumers on a number of DTT and IPTV platforms are currently either
unable to access the most valuable sport and movie content, or face restricted
access, is a source of concern.
10.33 On DTT, we consider there to be significant opportunity for market expansion, given
that there are about ten million DTT-only households 561 who cannot at present gain
access to Sky’s Core Premium channels (although they can currently access Setanta
Sports 1, which is a Core Premium channel). While DTT is not suited to carrying
large packages of pay TV channels (unlike cable and satellite), given its capacity
constraints, the evidence we have seen indicates that there is significant unmet
demand for Sky’s Core Premium channels on platforms using this distribution
technology (see paragraphs 7.65 to 7.74).
10.34 For example, Sky estimated (in April 2008) that around [ � ] households would
subscribe to premium content on its proposed Picnic service within five years of
launch, equivalent to around [ � ] per cent of DTT-only households 562 . More
generally, research carried out by Freeview in November 2007 found that around 22
per cent of Freeview users would definitely or probably consider paying either a
monthly or one-off fee to access more channels/programmes in addition to
Freeview's channels 563 .
10.35 There may also be scope for market expansion on IPTV, as this distribution
technology becomes more practical for pay TV, where at present Sky’s Core
Premium channels can only be accessed via Sky by Wire and Sky Player.
10.36 We may also see some market expansion on cable under a wholesale must-offer
remedy, where take-up of Sky’s Core Premium channels is currently much lower than
on satellite 564 . We have been provided with evidence to suggest that this may be
attributable, at least in part, to Virgin Media’s lack of an incentive to invest in
marketing Sky’s Core Premium channels as a consequence of wholesale charges
being too high, and some additional services not being available (see paragraphs
6.115 to 6.124).
561 See Ofcom’s Digital Television Update – 2008 Q4:
http://www.ofcom.org.uk/research/tv/reports/dtv/dtu_2008_04/.
562 [ � ].
563 462 face-to-face interviews were conducted between 14 and 25 November 2007 by Taylor Nelson
Sofres on behalf of Freeview. 70% of respondents were Freeview viewers and 30% were non-digital
viewers.
564 On cable, Virgin Media currently has about 3.5 million subscribers, of which [ � ]% (about [ � ])
subscribe to one or more of Sky’s Core Premium channels. This is a reduction of [ � ]% from the
penetration rate in 2000.