Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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TV Consultation, we set out here a number of characteristics which influence the
operation of the pay TV sector and which are therefore relevant to our assessment of
whether it is appropriate to take action to ensure fair and effective competition. We
set these out here:
� Consumer preferences for content, and the particular importance of premium
content as a driver of pay TV subscriptions.
� Content aggregation and the potential creation of market power.
� Fixed content production costs and the importance of price discrimination.
� Vertical integration of firms which are active in the market and the incentives this
creates.
Premium content as a driver of pay TV subscriptions
3.16 The comment is frequently made in broadcasting that ‘content is king’. A number of
consultation respondents agreed with the observation in our Second Pay TV
Consultation that no amount of high-tech platform features could make up for an
absence of attractive content, or “turn unattractive content into attractive content”.
The ability to time-shift a programme, for example, is of value precisely because
consumers want to watch a specific and valued piece of content in the first place.
3.17 This is not to say that platform features are unimportant – far from it. A sports fan,
given the choice between a sports channel in SD and HD, may well still value the
enhanced definition afforded by HD sufficiently to pay extra for it; however, given the
choice between that sports channel in SD and another channel which is in HD but
does not contain interesting content, they are much more likely to follow the
underlying content rather than the higher definition.
3.18 Although the general importance of attractive content to any broadcaster is
straightforward to understand, the question of which specific content is most
important as a driver of pay TV subscriptions is more complex. This is because the
characteristics which viewers look for when deciding what programme to watch are
highly subjective – the level of interest in a particular genre or a particular storyline,
the attractiveness of particular actors or actresses, the degree of support for a
particular sporting event or for a particular team, and so on. As a result, consumers
have very varied preferences for different types of content. This was illustrated by the
consumer research which we have set out in our previous consultation documents 20 .
3.19 We stated in our Second Pay TV Consultation that content which is likely to be most
effective in driving pay TV subscriptions must have two characteristics: a significant
appeal to a broad audience, and limited availability via free-to-air TV channels.
Content which has a broad appeal, but which is widely available free-to-air, such as
some of the UK-originated content available via the public service broadcasters, is
unlikely to drive pay TV subscriptions, since consumers are unlikely to pay a
significant premium to watch programmes similar to those which they can watch for
free.
3.20 Figure 4 below shows the genres of content that are most attractive to consumers.
20 See in particular the charts set out in section 4 of Annex 14 to our First Pay TV Consultation –
http://www.ofcom.org.uk/consult/condocs/market_invest_paytv/annex14.pdf.