Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
wanted to record programmes onto its PVR (Sky+). Additionally there have been
content changes – particularly on Sky Sports channels and basic tier channels.
4.162 Taken together, we consider the evidence on Sky’s premium sports subscriber
numbers and prices continues to point towards a degree of constraint on premium
sports channels, although we accept that the evidence on quality changes makes a
definitive judgement difficult.
Assessment of the constraint from FTA TV
Our position in the Second Pay TV Consultation
4.163 The characteristics of FTA sport are discussed in paragraphs 4.127 to 4.129 where
we noted that despite the high value of some FTA sports content, the infrequency
with which high-quality sports content is shown FTA is likely to limit the scope for
FTA sports to act as a constraint on pay TV.
4.164 One way to consider whether two products are close substitutes for each other is an
‘event analysis’ which examines, for example, the impact of the entry or exit of a firm
within the markets being assessed. If we observed a strong response from
incumbents or from existing consumers when a new product joined the market, this
might be evidence that the incumbent’s product and the new entrant’s product were
close substitutes.
4.165 The growth of Freeview and a greater number of basic channels featuring sport have
increased availability of sports and other programming on FTA and basic tier TV. The
number of households which access multi-channel TV on their main set via Freeview
has increased rapidly from about one million in 2002 to over ten million, as illustrated
in Figure 20. The entry of Freeview in 2002 enables us to examine the response of
other TV providers and of consumers.
Figure 20 Premium sport channel subscriptions and Freeview households (Q1
2000 to Q1 2008)
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Source: Sky 150 , Ofcom digital tracker survey, Setanta
4.166 If sport on Freeview were a close substitute for premium sports channels we would
expect the trend in Sky Sports subscriber numbers to have been impacted by the
growth in numbers of Freeview households. (We note that subscriptions to Sky will
also depend on other factors, such as changes in the price/quality combination
offered by Sky). However, the massive growth in popularity of Freeview since 2002
does not seem to have substantially impacted on growth in Sky Sports subscriber
numbers. Indeed, there does not appear to be direct substitution away from Sky
Sports as a result of the greater take-up of Freeview.
Respondents’ views
4.167 Sky commissioned a study which considered the extent to which geographical
variation in availability of DTT services affects demand for Sky’s TV services (“the
Seabright study”). The study suggests that “post code districts that have higher
access to Freeview also have [statistically] significantly lower levels of subscriptions
150 Sky response to Ofcom information request of 29 May 2008.
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