MDA Issues Decision On Exclusive Carriage Agreements
The Media Development Authority (MDA) has concluded its investigation into whether exclusive carriage agreements substantially foreclose the Pay-TV market in Singapore and should be regulated.
The investigations examined whether exclusive carriage agreements between a Pay-TV operator and its content providers would prevent a newcomer from securing popular content critical to its ability to attract subscriptions and thus prevent, distort or restrict competition in the Pay-TV market in Singapore.
The MDA sought public comment on this issue through a public consultation exercise, followed by a market research study to identify the content genres perceived by consumers to be critical to a Pay-TV service (see Annex A). The MDA then held further discussions with industry players.
Having considered the findings carefully, the MDA has determined that while certain content could be considered critical for the success of a Pay-TV service, exclusive carriage agreements per se do not substantially foreclose potential entrants’ access to key content for the Pay-TV market in Singapore.
Said Ms Ling Pek Ling, Director of Media Policy: “The MDA recognizes the importance of affording industry players maximum room to freely negotiate carriage agreements on mutually agreed terms as this will allow the creation of more compelling content for consumers. These factors are significant as the MDA continues to develop a regulatory system that balances respect for commercial decisions with the need to prevent anti-competitive behaviour in the mass media services markets in the public interest.”
In its investigations, the MDA applied Paragraph 7.5.6 of the Media Market Conduct Code to determine if exclusive carriage agreements had substantially foreclosed the Pay-TV market (see Annex B). Based on its current analysis, the MDA’s determination is that there is no substantial foreclosure of potential entrants’ access to key content for the Pay-TV market in Singapore, and there is no need for regulatory action. This determination has been shared with industry players.
The MDA recognizes that the media industry is dynamic with rapid developments, thus it will continue to monitor the market. If exclusive carriage agreements have a negative impact on consumers or the market, the MDA will assess the best approach towards addressing the problem.
In line with its aim to facilitate the provision of a wide range of mass media services in Singapore which serve the interests of the general public, the MDA continues to encourage further development in IPTV and other new platforms for delivering more quality TV services to consumers. Industry players who are interested to start trials or commercial services are invited to come forward to discuss their interests with the MDA.
“We encourage potential Pay-TV operators to come forward and work with content providers to increase the choice and quality of channels available to consumers. In fact, we are in active discussion with a few industry players to launch new Pay-TV services, such as IPTV, in Singapore,” said Ms Ling.
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Annex A
MARKET RESEARCH STUDY
The MDA engaged Spectrum Strategy Consultants Limited and ACNielsen Research Singapore to conduct a market research study of the Singapore Pay-TV market to identify the key content genres perceived by consumers to be important to a Pay-TV service and whether channels were substitutable for each other.
2 The market research study involved both qualitative and quantitative analysis. Six focus groups, each consisting six to eight respondents (four groups were subscribers and two groups were non-subscribers of the incumbent Pay-TV operator), and 600 telephone interviews (400 were subscribers and 200 were non-subscribers of the incumbent Pay-TV operator) were conducted. The people interviewed were all main decision-makers in the choice of Pay-TV subscription for the household.
3 The market research study findings identified 14 content genres: Kids; Educational/Documentaries; English Movies; English Entertainment/Variety; Music; English News; Sports; Chinese Movies; Chinese Drama; Chinese Entertainment/Variety; Chinese News and Information; Indian and Malay; Foreign Channels; and Local Channels. The market research study findings also established content to be a key factor in deciding whether to subscribe to a Pay-TV service and that channels are substitutable within genres.
4 The Sports and Educational genres were clearly regarded as key genres by consumers. These were followed by the English Movies and English News genres. (Please refer to Table 1.) These content genres could be considered critical for the success of any Pay-TV operator in Singapore.
Table 1: Top Genres by Respondents
Total base N= 600
Genres %
1. Sports.................................................39%
2. Educational........................................35%
3. English Movies..................................19%
4. English News.....................................16%
5. Chinese Drama..................................14%
6. Chinese Entertainment/Variety.....13%
7. Kids......................................................10%
8. Chinese News & Information.............9%
9. Indian & Malay....................................7%
10. Chinese Movies..................................6%
11. English Entertainment/Variety.......6%
12. Music...................................................4%
13. Foreign Channels...............................0%
14. Local Channels...........................Not counted.
----------------
Annex B
METHODOLOGY USED IN THE MDA’S INVESTIGATION OF THE EXCLUSIVE CARRIAGE AGREEMENTS ISSUE
The MDA assessed whether exclusive carriage agreements substantially foreclose the Pay-TV market in Singapore in accordance with the considerations in Paragraph 7.5.6 of the Media Market Conduct Code (“Code”). Paragraph 7.5.6 prohibits:
Paragraph 7.5.6: Foreclosure of Access to Ancillary Media Services Necessary to Provide Competitive Mass Media Services
Agreements with providers of Ancillary Media Services which substantially foreclose access to an input, or a channel of distribution, where this would prevent, restrict or distort competition in any Mass Media Services Market. This includes Agreements between a Regulated Person and an entity that distributes its services (such as an Agreement between a newspaper publisher and a newspaper distribution company) or an Agreement between a Regulated Person and an entity that provides content (such as an Agreement between a television broadcaster and a production house). Whether a foreclosure is “substantial” depends on the following factors:
(a) the percentage of the market for the Ancillary Media Service that is foreclosed;
(b) the duration of the Agreement;
(c) whether the Agreement has a legitimate business purpose or whether its principal effect is to foreclose competitors’ access to inputs or distribution channels; and
(d) whether as a practical matter, the Regulated Person’s competitors retain the ability to obtain comparable inputs or distribution, from other providers, on reasonable prices, terms and conditions.
2 The MDA applied the above factors to four content genres identified as critical to the Pay-TV market in Singapore: sports, educational, English movies and English news (see Annex A).
3 Under (a), the MDA examined the nature of the exclusive carriage agreements. The MDA determined the total number of available channels in Singapore for a genre based on a market definition of channel(s) carried on 20 satellites whose footprints cover Singapore. The percentage of market foreclosed was obtained by dividing the number of exclusive channels by the number of available channels in Singapore.
4 Under (b), in line with international practices, exclusive carriage agreement with a duration over three years for the sports and English movies genres were considered as long. For other genres, the MDA determines the average duration on a case-by-case basis, taking into consideration many factors, such as the content providers’ standard practice and the expiry dates of the channels in a genre.
5 Under (c), the MDA took into consideration factors such as who initiated the exclusive carriage agreement, whether entering into exclusive carriage agreements is content providers’ standard practice, whether the exclusive carriage agreement was necessary to achieve significant efficiencies and whether the potential anti-competitive effects were relatively limited.
6 Under (d), the MDA determined what were the comparable channels based on whether the nature and branding of the channels were similar to the exclusive channels. The MDA also determined whether potential Pay-TV operators had the ability to obtain comparable channels, such as whether potential Pay-TV operators were able to self-package or produce their own channels or whether content providers could package new channels or provide other channels to potential Pay-TV operators.
The investigations examined whether exclusive carriage agreements between a Pay-TV operator and its content providers would prevent a newcomer from securing popular content critical to its ability to attract subscriptions and thus prevent, distort or restrict competition in the Pay-TV market in Singapore.
The MDA sought public comment on this issue through a public consultation exercise, followed by a market research study to identify the content genres perceived by consumers to be critical to a Pay-TV service (see Annex A). The MDA then held further discussions with industry players.
Having considered the findings carefully, the MDA has determined that while certain content could be considered critical for the success of a Pay-TV service, exclusive carriage agreements per se do not substantially foreclose potential entrants’ access to key content for the Pay-TV market in Singapore.
Said Ms Ling Pek Ling, Director of Media Policy: “The MDA recognizes the importance of affording industry players maximum room to freely negotiate carriage agreements on mutually agreed terms as this will allow the creation of more compelling content for consumers. These factors are significant as the MDA continues to develop a regulatory system that balances respect for commercial decisions with the need to prevent anti-competitive behaviour in the mass media services markets in the public interest.”
In its investigations, the MDA applied Paragraph 7.5.6 of the Media Market Conduct Code to determine if exclusive carriage agreements had substantially foreclosed the Pay-TV market (see Annex B). Based on its current analysis, the MDA’s determination is that there is no substantial foreclosure of potential entrants’ access to key content for the Pay-TV market in Singapore, and there is no need for regulatory action. This determination has been shared with industry players.
The MDA recognizes that the media industry is dynamic with rapid developments, thus it will continue to monitor the market. If exclusive carriage agreements have a negative impact on consumers or the market, the MDA will assess the best approach towards addressing the problem.
In line with its aim to facilitate the provision of a wide range of mass media services in Singapore which serve the interests of the general public, the MDA continues to encourage further development in IPTV and other new platforms for delivering more quality TV services to consumers. Industry players who are interested to start trials or commercial services are invited to come forward to discuss their interests with the MDA.
“We encourage potential Pay-TV operators to come forward and work with content providers to increase the choice and quality of channels available to consumers. In fact, we are in active discussion with a few industry players to launch new Pay-TV services, such as IPTV, in Singapore,” said Ms Ling.
----------------
Annex A
MARKET RESEARCH STUDY
The MDA engaged Spectrum Strategy Consultants Limited and ACNielsen Research Singapore to conduct a market research study of the Singapore Pay-TV market to identify the key content genres perceived by consumers to be important to a Pay-TV service and whether channels were substitutable for each other.
2 The market research study involved both qualitative and quantitative analysis. Six focus groups, each consisting six to eight respondents (four groups were subscribers and two groups were non-subscribers of the incumbent Pay-TV operator), and 600 telephone interviews (400 were subscribers and 200 were non-subscribers of the incumbent Pay-TV operator) were conducted. The people interviewed were all main decision-makers in the choice of Pay-TV subscription for the household.
3 The market research study findings identified 14 content genres: Kids; Educational/Documentaries; English Movies; English Entertainment/Variety; Music; English News; Sports; Chinese Movies; Chinese Drama; Chinese Entertainment/Variety; Chinese News and Information; Indian and Malay; Foreign Channels; and Local Channels. The market research study findings also established content to be a key factor in deciding whether to subscribe to a Pay-TV service and that channels are substitutable within genres.
4 The Sports and Educational genres were clearly regarded as key genres by consumers. These were followed by the English Movies and English News genres. (Please refer to Table 1.) These content genres could be considered critical for the success of any Pay-TV operator in Singapore.
Table 1: Top Genres by Respondents
Total base N= 600
Genres %
1. Sports.................................................39%
2. Educational........................................35%
3. English Movies..................................19%
4. English News.....................................16%
5. Chinese Drama..................................14%
6. Chinese Entertainment/Variety.....13%
7. Kids......................................................10%
8. Chinese News & Information.............9%
9. Indian & Malay....................................7%
10. Chinese Movies..................................6%
11. English Entertainment/Variety.......6%
12. Music...................................................4%
13. Foreign Channels...............................0%
14. Local Channels...........................Not counted.
----------------
Annex B
METHODOLOGY USED IN THE MDA’S INVESTIGATION OF THE EXCLUSIVE CARRIAGE AGREEMENTS ISSUE
The MDA assessed whether exclusive carriage agreements substantially foreclose the Pay-TV market in Singapore in accordance with the considerations in Paragraph 7.5.6 of the Media Market Conduct Code (“Code”). Paragraph 7.5.6 prohibits:
Paragraph 7.5.6: Foreclosure of Access to Ancillary Media Services Necessary to Provide Competitive Mass Media Services
Agreements with providers of Ancillary Media Services which substantially foreclose access to an input, or a channel of distribution, where this would prevent, restrict or distort competition in any Mass Media Services Market. This includes Agreements between a Regulated Person and an entity that distributes its services (such as an Agreement between a newspaper publisher and a newspaper distribution company) or an Agreement between a Regulated Person and an entity that provides content (such as an Agreement between a television broadcaster and a production house). Whether a foreclosure is “substantial” depends on the following factors:
(a) the percentage of the market for the Ancillary Media Service that is foreclosed;
(b) the duration of the Agreement;
(c) whether the Agreement has a legitimate business purpose or whether its principal effect is to foreclose competitors’ access to inputs or distribution channels; and
(d) whether as a practical matter, the Regulated Person’s competitors retain the ability to obtain comparable inputs or distribution, from other providers, on reasonable prices, terms and conditions.
2 The MDA applied the above factors to four content genres identified as critical to the Pay-TV market in Singapore: sports, educational, English movies and English news (see Annex A).
3 Under (a), the MDA examined the nature of the exclusive carriage agreements. The MDA determined the total number of available channels in Singapore for a genre based on a market definition of channel(s) carried on 20 satellites whose footprints cover Singapore. The percentage of market foreclosed was obtained by dividing the number of exclusive channels by the number of available channels in Singapore.
4 Under (b), in line with international practices, exclusive carriage agreement with a duration over three years for the sports and English movies genres were considered as long. For other genres, the MDA determines the average duration on a case-by-case basis, taking into consideration many factors, such as the content providers’ standard practice and the expiry dates of the channels in a genre.
5 Under (c), the MDA took into consideration factors such as who initiated the exclusive carriage agreement, whether entering into exclusive carriage agreements is content providers’ standard practice, whether the exclusive carriage agreement was necessary to achieve significant efficiencies and whether the potential anti-competitive effects were relatively limited.
6 Under (d), the MDA determined what were the comparable channels based on whether the nature and branding of the channels were similar to the exclusive channels. The MDA also determined whether potential Pay-TV operators had the ability to obtain comparable channels, such as whether potential Pay-TV operators were able to self-package or produce their own channels or whether content providers could package new channels or provide other channels to potential Pay-TV operators.
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