Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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premium channels have [ � ] been subject to an enforced buy-through 41 , but the
same was not true of Setanta’s premium channels 42 .
3.50 As noted above, bundling as a price discrimination mechanism may be beneficial for
both consumers and producers. There are however two potential sources of concern:
� Bundling of content in circumstances where no standalone products are available
restricts consumer choice. This is a particular concern in the case of enforced
buy-through, which prevents consumers who wish to purchase a stand-alone
premium package from doing so.
� Bundling is a form of content aggregation, which may be associated with a
degree of market power.
3.51 Our level of potential concern with bundling and price discrimination will therefore
depend on the particular circumstances:
� In a situation where marginal cost of distribution is low, such practices are likely
to offer overall efficiency benefits.
� If these practices take place in the context of a competitive market, they are likely
to promote consumer welfare.
� In a situation where there is market power, such practices may still result in
increased efficiency. However, much of the benefit is likely to accrue to the
producer, away from the consumer.
� In a situation where the market power can be leveraged into other markets it is
likely to produce additional competition concerns which are likely to outweigh any
compensating efficiency benefits.
Vertical integration
3.52 It is very common for companies involved in pay TV to be vertically integrated. This is
illustrated in the diagram below, which we set out in our First Pay TV Consultation,
and which shows which major companies are active at which level of the value chain.
41 [ � ].
42 Setanta went into administration on 23 June 2009, shortly after the live FAPL rights which had been
held by Setanta were awarded to ESPN. ESPN has announced that it has agreed a wholesale deal
with Sky for distribution on Sky’s DSat platform. It has also announced an intention to make its
channel including FAPL coverage ‘widely available across multiple pay-TV platforms’, although at the
time of writing no other details of availability across platforms other than Sky’s have been announced.