Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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� In relation to the sale of movie rights, we noted that there was the possibility in
the medium term of disruptive changes in the way movie content is distributed,
and suggested that now might not be the right time for a regulator to attempt to
set detailed behavioural rules governing the sale of movie content rights.
12.12 In response to this, the FAPL in particular pushed back strongly on the idea of
intervening in the way rights are bought and sold, on the basis that there was existing
regulation in place with respect to the sale of FAPL rights, effective until the end of
the 2012/13 football season.
Our current view
12.13 We remain of the view that a remedy which placed major restrictions on the ability of
firms to aggregate content, designed to eliminate market power at source, is likely to
risk sacrificing the benefits to consumers of content aggregation. Furthermore, to the
extent that we can find other means of addressing the effects of this market power,
such measures may not be necessary. As a general rule, we therefore believe that
they should only be explored as a last resort.
12.14 We do however believe that there may be a case for more targeted interventions to
address certain specific concerns in relation to SVoD movie rights, and in relation to
the next auction of live FAPL rights. We set these out in turn below.
Movies
12.15 We noted in our Second Pay TV Consultation that although premium movie content
is likely to remain important to consumers, the manner in which it is distributed is
likely to change. We consider in this section whether restricted access to certain
movie rights may be holding back this change, to the detriment of consumers.
12.16 As discussed in Section 6, the same incentives which determine how Sky distributes
its channels are also likely to determine how it exploits its content rights, in the sense
that Sky has an incentive to exploit its content rights in such a manner as to favour its
own retail business and its own platform. The resulting selective exploitation of
content rights might be a concern if it allowed Sky to protect its market power, and
distort competition
12.17 Our concern here relates to the exploitation of the rights to distribute movies via VoD.
These have a high strategic importance, due to the potential which we have already
noted for disruptive change in the way movies are distributed. We consider that the
rights to sell VoD movie services on a subscription basis (SVoD rights) are of
particular importance in this context, since they offer a payment mechanism which is
likely to be particularly attractive to consumers.
12.18 We have established that Sky currently holds the SVoD rights for all six Major
Hollywood Studios, and believe that there is unlikely to be a substantial change in the
way these rights are awarded in the UK in the short to medium term.
12.19 We further believe that Sky has an incentive to restrict exploitation of these
subscription VoD rights, in order to protect its own linear movie channels, which are
the only means by which it can deliver movie content on its satellite platform.
Furthermore, it appears to be acting on this incentive.
12.20 We acknowledge that competition authorities and regulators should be very cautious
about intervening to change how firms exploit content rights, due to the risk that such