Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
most important content, especially when assessed by rights values) and England
internationals, and also live golf;
� Sky Sports 2 also appears to be a reasonably close substitute for Sky Sports 1 as
it contains a significant amount of top flight football (UEFA Champions League),
cricket, golf, rugby union and rugby league.
4.132 We therefore conclude that our assessment of consumer preferences and
characteristics suggests both of these channels are likely to lie within the same
market as Sky Sports 1.
4.133 The relatively low amount and quality 129 of football, cricket, and rugby union on Sky
Sports 3 and Xtra suggest these channels are not a close substitute for Sky Sports 1,
2 or Setanta Sports 1 and are likely to lie outside the relevant wholesale market. We
consider that other content (general entertainment on TV for example) would be a
more distant substitute than sports channels given that subscribers have very strong
preferences for specific sports.
4.134 We recognise that FTA TV broadcasts important football, golf, rugby union, and
rugby league content. However it cannot match the regularity and quantity of sport
found on Sky Sports 1, 2 or Setanta Sports 1. We therefore think it is unlikely that
FTA would be a sufficient indirect constraint on a monopolist wholesaler of these
premium sports channels. However, we acknowledge that some sport set out in
Figure 7 might act as a strong out of market constraint on a monopolist wholesaler of
premium sports channels.
Assessing consumers’ response to a SSNIP
Our position in the Second Pay TV Consultation
4.135 In order to assess the likely indirect constraint that consumers place on wholesalers
of premium channels we considered their likely response to a price rise. High levels
of switching to other products in response to relatively small increases in prices from
competitive levels could indicate that the products were in a broad market.
Conversely, low switching could be evidence of narrow markets. As we have
explained previously, where prices may be above competitive levels we would expect
to observe a higher level of switching in response to a price rise, and in this case
high switching could be consistent with finding narrow markets.
4.136 In our First Pay TV Consultation we reported our survey evidence on consumers’
stated response to hypothetical price rises of the premium sports channel element of
a consumer’s bundle (i.e. Sky Sports Mix) 130 . The evidence suggested that although
large numbers of subscribers might switch or change their subscription in response
to a price rise, many chose to keep the sports element of the package. We stated
that such responses might be subject to ‘stated preference bias’, so they should be
interpreted with caution.
129 The quality can be measured by average audience for example.
130 Ofcom December 2007 consultation paragraph 5.31.
83