PAY TV UNDER THE COMPETITION
REGULATORS’ SCRUTINY
THE FRENCH AND UK PERSPECTIVES
20 MAY 2014
Stephen Wisking, Partner, stephen.wisking@hsf.com
45420667
OVERVIEW
• Pay TV Supply Chain
• History of Regulatory Scrutiny
• BSkyB/ITV
• Pay TV Movies
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PAY-TV SUPPLY CHAIN
Content rights holders
Advertisers
Content aggregators (including channel providers)
Pay-TV platforms
DTH
Cable
DTT/IPTV
DTT
IPTV
Open Internet
Pay-TV retailers
TVOD
SVOD
‘Premium’ pay
channels
‘Basic’ pay
channels
Consumers
3
HISTORY OF REGULATORY SCRUTINY
• 1995 Sky cable price Undertakings to the DGFT (reviewed every two years)
• 1999 Restrictive Practices Court (Premium League, Sky, BBC)
• 2000-2002 OFT Competition Act Investigation of Sky
• 2006-2009 review of Sky acquisition of 17.9% of ITV
• 2007-2010 Ofcom Pay TV review
• 2008-2009 CC review of BBC/ITV/Ch4 VoD JV
• 2010 - ? Pay TV review appeals
• 2010- 2012 CC Pay TV Movies review
• 2014 Further Ofcom Pay TV Review
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SKY/ITV
• Sky acquired 17.9% in ITV plc a FTA broadcaster
• Public interest referral to the CC (plurality)
• Ability to materially influence:
• Ability to block special resolutions
• Potential to limit strategic options
• Weight would be given to Sky’s views
• All TV market analytical framework – FTA is a constraint on Pay TV – includes
VoD
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SKY/ITV
• SLC because Sky could influence:
• Content production/commissioning
• Investment in HD on DTT
• Influence acquisitions by or of ITV
• No SLC in relation to:
• TV advertising
• Pay TV
• News provision
• No plurality concern
6
SKY/ITV APPEALS
• JR grounds only
• Challenge on the basis that the CC failed to meet the standard of proof for
material influence/SLC rejected by the CAT/CoA
• Virgin successfully challenged in the CAT the plurality test applied by the CC but
reversed in the CoA
7
PAY TV REVIEW
• 2007 complaints by BT, Setanta, TopUpTV and Virgin Media to Ofcom seeking a
market reference to the CC
• 2010 Ofcom decision:
• Wholesale must offer remedy in respect of SS1 and SS2
• Consultation on a reference to the CC in relation to movies
• At the same time conditional approval of Sky’s 2007 application to offer a pay DTT
service
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CC PAY TV MOVIES
• Referred the supply/acquisition of Pay TV movie rights for linear broadcast/SVoD
services in the first pay window (FSPTW) and wholesale supply of packages
including Sky movie channels
• Ofcom concern that Sky’s position in relation to SVoD rights could impede
competition – CA98 and sectoral powers limited
• Theory of harm – vicious circle – without access to rights difficult to compete for
retail subs and without retail subs harder to compete for rights
• CC provisionally finds an AEC in 2011 but not in the final report in 2012 – market
developments and the reappraisal of evidence critical
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MARKET DEFINITION
• Context specific – wider than Ofcom/OFT but narrower than ITV
• Pay TV retail market including movies, sports and basic channels and SVoD but
left open whether incl. TVoD and PPV
• FTA, telephony and broadband out of market constraints
• Did not define the market at the wholesale level
• At the content level all movie content in the FSPTW (not limited to Hollywood
majors)
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CC ANALYSIS
• Sky is found to have market power in the retail market
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•
•
•
Difficulties of switching
Costs of large scale entry and expansion
Increased competition from Lovefilm and Netflix not enough
But market power had not prevented development of SVoD services
• Sky Movies content was only significant to a small minority of Pay TV subscribers
in choosing a Pay TV service
• Other attributes more valued than recency (e.g. cost, contract periods and
range of content)
• OTT services are substitutable
• Change from PFs
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CC ANALYSIS
• Barriers to acquisition of rights were limited:
• Lower barriers for OTT retailers and expected to erode further
• Change from PFs
• It follows no strategic incentive to limit supply of Sky Movie channels to other
retailers:
• Evidence inconclusive as to whether terms of supply placed other retailers at a
disadvantage
• Change from PFs
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