Challenging content exclusivity in network industries

The case of digital broadcasting

Tom EvensGhent University, Belgium

Media & ICT Research Group (MICT)

Interdisciplinary Institute for Broadband Technology (IBBT)

2010 European Regional ITS Conference

Copenhagen, Denmark, September 13-15, 2010

Exclusivity of content

• Long considered as optimal strategy

• Guarantee remuneration of investments in

• Content production (right holders)

• Platform infrastructure (distributors)

• But still profitable and sustainable in

network industries, in casu digital television

broadcasting?

Network industries

• Value of a network is proportional to the

number of connected users

• Direct externalities: similar users

e.g. mobile phones, social network sites

• Indirect externalities: different users

e.g. broadcasters, newspapers

• Demand depends not only on price, but

also on expected number of users

Platformisation of industries

• Platform-based intermediaries

• Four key business roles

•Demand-side users (viewers)

•Supply-side users (content providers)

•Platform owners (content aggregators)

•Platform sponsors (e.g. CAS & equipment providers)

Chicken-and-egg problem

• Interaction between different markets

•Viewers/subscribers

•Content providers

•Advertising agencies

• Chicken-and-egg problem

• Exclusive premium content

• Critical mass for platform development

Exclusivity as business strategy

• Access to premium content is bottleneck

• First movers signed exclusive dealings

• Differentiation from competitors

• Raise entry barriers for rivalling platforms

• Foreclose markets and limit competition

• ‘Winner takes all’: competition for the market

• Request for exclusivity led to excessive prices

• Origin and not consequence of high costs

Exclusivity contested

• Delay investments alternative infrastructures

• Hamper innovation in platform features

• Hinder competition in the market

• Harm consumer welfare at industry expense

• Does not reflect the platform-based model

Non-exclusive distribution remains welfare optimum for all stakeholders in the game

Regulations and public policies

• European Commission case law

•UEFA Champions League

• National regulatory decisions

• Ofcom Decision (2010) on competition in pay-tv

• Demanding dominant player to sell its sports

networks to competing cable and terrestrial networks

• Complaints that exclusive control over broadcasting

rights created vicious circle hindering competition and

keeping prices artificially high

New business model

• Regarding exclusivity, diverging interests btw

• Right holders (maximal diffusion)

• Distributors (entry barriers)

• If part of same group (VI), problematic issue

• Platform-based broadcasting model

• Affiliate to multiple platforms (shared access)

• Retail model (subscription, pay-per-view)

• Revenue sharing (royalties, per-user fees)

A Dutch example

€9.49 €10 €14.95 €6.99€12.5

Platform benefits

• Rights holders & content producers

• Revenues may grow with number of viewers

• Platform owners & distributors

• Incentives for alternative platforms & innovation

• New USPs such as pricing, programming variety, quality

of service, customer support

• Viewers & subscribers

• Non-discriminatory access to variety of content

• Tighter competition should lead to lower prices

Thanks for listening

[E]: Tom.Evens[AT]UGent.be

[W]:http://www.mict.be