Pay TV phase three document - Stakeholders - Ofcom

Section 4
4 Market definition
Summary
Pay TV phase three document – non-confidential version
4.1 We remain of the view that there are narrow economic markets for the wholesale of
Core Premium Sports and Core Premium Movie channels, and that Sky has market
power in those markets. That market power is enabled by content aggregation
carried out either by rights owners or by Sky, specifically:
� In relation to sport, the aggregation of the rights to specific sporting competitions
by sporting bodies such as the FAPL, and the further aggregation by Sky of the
rights to different competitions.
� In relation to movies, the aggregation by Sky of rights to show the movies from all
six major Hollywood studios.
4.2 The wholesale market for Core Premium Sports channels comprises Sky Sports 1,
Setanta Sports 1 43 and Sky Sports 2. These channels all feature a large number of
highly popular live sporting events shown regularly throughout the year, and this
content distinguishes them from other channels which feature popular events less
regularly or only occasionally, and/or feature less popular events. In coming to this
view, we have considered a wide range of further evidence in light of responses to
our Second Pay TV Consultation, including the characteristics of the content shown
on these channels, consumer preferences for such content, econometric analysis of
the constraint from free-to-air TV, and analysis of price changes.
4.3 The wholesale market for Core Premium Movie channels comprises all Sky Movies
channels which show movies in the first pay TV window from the Major Hollywood
Studios. That includes all Sky Movies channels apart from Sky Movies Classics. In
coming to this view, we have considered a range of evidence similar to that on
sports, as well as data on alternative means of watching movies, and on Sky’s high
and increasing margins on movies.
4.4 One additional piece of analysis that we have carried out since our Second Pay TV
Consultation is to define retail markets. Our view for consultation is that there are
narrow markets for the retail of packages including Core Premium Sports and Core
Premium Movie channels to residential customers. In coming to this view, we rely on
much of the same evidence as for our wholesale assessment. We believe that the
characteristics of Core Premium channels are such that demand-side substitution is
unlikely, and further that entry by new suppliers is unlikely in the short term, because
of the lack of availability of the relevant wholesale channels.
43 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.
Our subsequent conclusions are likely to be independent of whether Setanta Sports 1, or some other
channel provided by ESPN, exists as part of the Core Premium Sports market.
51