Competition in content markets

Yih-Choung Teh, Competition Policy Director, Ofcom

9 July 2012

DCMS Communications Review Seminar Series

2

Overview

• Consumer attitudes and use of content services

• Examples of market developments

• Implications for competition

3

Technological innovation and convergence is changing the way we consume content

Broadcast services

On Demandservices

The take-up of new technologies is increasingly rapid

4

Number of years taken to reach 50% penetration

Source: Oliver & Ohlbaum

(UK launch date)’86 ’88 ’75 ’23 ’86 ’67 ’00 ’98 ’04 ’99 ’05 ’06’07’09’97

Web adoptionTraditional AV adoption Faster AV adoption

5

For example, use of the internet to access content and bundling of services has increased...

Proportion of homes buying bundled communications services (%)

Source: Ofcom (note: data as at Q1 of each year)

2008 2009 2010 2011 20120

20

40

60

18 1622 24 27

3 22 2

212 2017 16

1967

10 119

3946

50 5357

Total

Other

Fixed voice, internet & pay-TV

Fixed voice & pay-TV

Proportion of web users accessing video content every week (%)

TV programmes/films Short clips0

10

20

30

14

2018

26

2010 2011

Source: Ofcom research

6

Tablet computer Smartphone0

10

20

30

40

2

26

11

39

Q1 2011 Q1 2012

Source: Ofcom research

...and consumers now want to access content anytime, anywhere

Accessing content has moved beyond the traditional TV screen and home:

• In 2011, 25% of mobile web users watched TV / video content or listened to music online

• 2011 also saw the emergence and increase in popularity of tablets, in addition to smartphones

Mobile device take-up (%)

7

However, demand for traditional services remains strong

2005 2006 2007 2008 2009 20103.3

3.4

3.5

3.6

3.7

3.8

3.9

4.0

4.1

Viewing per head, per day (hours) in all homes for the UK TV industry

All

vide

o

All

audi

o

Tex

t co

mm

s

Oth

er o

fflin

e m

edia

Oth

er in

tern

et m

edia

Prin

t m

edia

Voi

ce c

omm

s

Gam

es

0

50

100

150

200

250

Average amount of media used per day (minutes)

Source: BARB Source: Ofcom research

8

‘Must-have’ content remains critical for success

Source: Ofcom’s first Pay TV consultation; news sources88

/89

- 91

/92

92/9

3 -

96/9

7

97/9

8 -

00/0

1

01/0

2 -

03/0

4

04/0

5 -

06/0

7

07/0

8 -

09/1

0

10/1

1 -

12/1

3

13/1

4 -

15/1

6

0

200

400

600

800

1000

1200

Premier League live rights values per season (£m)

Sports OtherMovies and US content

Ofcom Pay TV Review, 2010

Competition Commission, Movies on Pay TV, 2012

9

Innovation is supporting greater competition in content distribution though network effects remain important

SatelliteDTT

CableBroadband

10

Electronic Programme Guides are evolving into more sophisticated User Interfaces raising new challenges

11

Greater integration across the value chain / convergence may raise issues for the competition regime

Content Supply

Data Transfer

Packaging and Delivery

Data Hosting

CONTENT RIGHTS

CONNECTIVITY PROVIDERS DEVICE MANUFACTURERS

INTEGRATED PLATFORMS

OTT PLATFORMS

12

Analysis of viewing data is an increasingly valuable asset with implications for advertising markets

13

Implications for the broadcasting competition regime

Broadcasting markets have existed in the context of, and been shaped by, regulatory frameworks, including in relation to competition

• Technological change. How can issues be addressed in a timely fashion, given the rate of technological change?

• Service innovation. Should the scope of the regime go beyond broadcast licensed services (eg standalone video on-demand)?

• Convergence. Should the regime take more explicit account of telecoms markets to ensure effectiveness, given convergence?

• Globalisation. Does the regime need to recognise that broadcasters and service providers may increasingly be based outside the UK?