Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
a world in which movies are generally accessed more directly, for example via
various forms of internet download.
1.15 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 already
watch for free.
Content aggregation and market power
1.16 Having reviewed evidence presented in consultation responses, we remain of the
view that there are narrow economic markets for the wholesale of Core Premium
Sports and Core Premium Movie channels 2 , and that Sky has market power in those
markets. Sky’s 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.
1.17 The wholesale market for Core Premium Sports channels comprises Sky Sports 1,
Setanta Sports 1 3 and Sky Sports 2. In coming to this view, we have considered a
wide range of evidence, 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 the observed response to price changes.
1.18 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 Classics. In coming to that
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 the high and increasing
margin of wholesale prices over costs.
1.19 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, which suggests that
2 See section 4 for the full description of what is meant by these terms; Core Premium Sports
channels are channels regularly featuring live sporting events which a significant number of
consumers find highly attractive. Core Premium Movies channels are channels including movies in
the first TV subscription window produced or licensed by the six major Hollywood studios.
3 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 competition concerns 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.
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