The premium content distribution landscape is changing rapidly, creating new challenges for regulators at the same time as it creates new opportunities for content and service providers. Pay-TV providers and other content creators and distributors are facing increasingly fast and dramatic market shifts – in device capabilities and form factors, consumption patterns, and business models (for example, over-the-top Internet video offerings like Hulu in the USA). The ongoing digitisation of content and the convergence of transport networks are enabling the growth of IP and Internet-based content delivery, and in turn creating greater convergence between the communications and media industries.
These developments are already enabling a raft of new consumer content services and content channels, and giving rise to increasingly diverse and complex partnerships across the value chain. However, there is also a risk that the resulting changes in market structure may provide significant advantages to existing players who have the financial or market power to extend their presence either vertically or horizontally within the premium content value chain. This may limit consumer choice or lead to excessively high prices for certain types of content, raising the question of whether regulatory interventions may be required to ensure a level playing field that will maximise the availability of premium content at reasonable prices.
Such a risk may be greatest in pay-TV markets which show high levels of vertical integration, but even in such markets, market failure can be difficult to judge, and complex to remedy effectively. As a result, regulators are taking a variety of approaches - as demonstrated by recent examples in France and Singapore – and in many cases are holding back from intervening.
- In France, multi-play operator Orange’s acquisition of exclusive premium sports rights and broadcast of exclusive movie content on its Orange Cinema Series channel has prompted other operators/ISPs to complain about anti-competitive behaviour. The French regulator CSA/ARCEP considered ex-ante intervention aimed at forcing Orange to make its premium content available to other pay-TV providers, either through forced unbundling of its pay-TV offerings, or through selling its pay-TV channels wholesale to other pay-TV providers. However, a July 2010 ruling upheld Orange’s right to provide these channels on an exclusive basis, and for the time being the regulator is simply observing the market . It is worth noting that Orange’s control of exclusive sports rights is fairly limited (10% of key football matches are shown on Orange Sport), so the market impact of this exclusivity may not be that significant.
- In Singapore, the Media Development Authority (MDA) has taken a more active approach to intervention in the pay TV retail market. The MDA implemented a new public interest obligation in the Media Market Conduct Code in March 2010, placing a requirement on retailers who acquire exclusive content, to retail it on all qualifying pay-TV platforms, rather than keeping it exclusive at the platform level (at present, the two pay-TV platforms in the market are Starhub’s vertically-integrated cable platform, and SingTel’s vertically-integrated IPTV platform). The implication is that consumers should ultimately be able to access more content through a single pay-TV set-top box, in contrast to the present market structure in which pay-TV providers compete based on exclusive content offerings.
As the pay-TV market environment continues to evolve, regulators will face increasingly complex challenges in protecting the interests of consumers. As well as considering content rights ownership and exclusivities, regulators need to understand the implications of premium TV content being distributed over tablets and mobile devices, as well as network-level market issues such as net neutrality. All of these have significant potential to impact both the consumer, and market players from across the value chain.
Analysys Mason has extensive experience working with regulators and competition authorities, leading telcos, broadcasters, media companies, and IPTV and retail TV service and platform providers, to review market and competitive trends, build market and technology forecasts, and advise on effective regulatory and growth strategies.
If you have questions on the issues raised in this article or would like further information on our capabilities in this area, please contact Alexandra Rehak, Research Director, at alexandra.rehak@analysysmason.com.