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Pay TV under the competition regulators’ scrutiny the French and UK perspectives

Pay TV under the competition regulators’ scrutiny the French and UK perspectives. Stephen Wisking , Partner, stephen.wisking@hsf.com. 20 May 2014. 45420667. Overview. Pay TV Supply Chain History of Regulatory Scrutiny BSkyB /ITV Pay TV Movies. Pay-tv supply chain.

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Pay TV under the competition regulators’ scrutiny the French and UK perspectives

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  1. Pay TV under the competition regulators’ scrutinythe French and UK perspectives • Stephen Wisking, Partner, stephen.wisking@hsf.com • 20 May 2014 45420667

  2. Overview • Pay TV Supply Chain • History of Regulatory Scrutiny • BSkyB/ITV • Pay TV Movies

  3. Pay-tv supply chain Content rights holders Content aggregators (including channel providers) Advertisers Pay-TV platforms DTH Cable DTT/IPTV DTT IPTV Open Internet Pay-TV retailers ‘Premium’ pay channels SVOD TVOD ‘Basic’ pay channels Consumers

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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)

  11. CC Analysis • Sky is found to have market power in the retail market • Difficulties of switching • Costs of large scale entry and expansion • Increased competition from Lovefilmand 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

  12. 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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