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Issues

Ad Hoc Alliance against unfair competition in the TV and new services markets

Relevant markets in the broadcasting sector.

I. Introduction.

The outlining of a specific competition policy for a given sector requires, as a starting point, a clear understanding of the nature of the business concerned, and more specifically of the relevant product markets.

As far as the broadcasting sector is concerned, there is a strong feeling amongst the private operators, that the competition authorities have not yet acquired a thorough knowledge of the relevant product markets, especially regarding the output side.

The purpose of this paper is to provide a conceptual approach to this debate.

II. The dual output of media products.

Like all other media types, television and radio share a unique characteristic; that they address, with one single product, two different output markets.

a) The first output market of each media product is the consumer market.
Every media product competes for the time of the consumers by offering them content that consists of a mixture of information, service and entertainment.

This content is presented either against payment (e.g. newspaper, magazines, pay-television, cinema,...), or for free (e.g. free-sheets, free-to-air-television, radio, teletext, internet,...)

In the consumer market each media-type constitutes a relevant product market of its own, since the degree of substitution between the different media-types is rather low. Indeed, the specific characteristics of each media-type determine not only the content provided to the consumer, but also the way in which he gets access to it (read, listen or look) and where (home, car, office) and when (morning, evening, all day) he uses it.

 

b) The second output-market of each media product is the advertising market, to which the media sell space so that the advertisers can reach the consumers of the media product.

The advertising market itself is subdivided into different relevant product markets by function of the nature of the publicity (display advertising, all sorts of classified ads, sponsorship, sales promotion, and so on).

The advertising market is in essence the secondary output market of each media product. Indeed advertisers will only buy space from a medium by function of the quantitative and qualitative audience reach obtained by that medium in the primary market. In other words, a market share in the consumer market (the audience) is the conditio sine qua non for a market share in the advertising market.

III.     Misconceptions of competition policy vs the media-sector.

Those unique characteristics of the media (two output markets for a single product, which is often available free to the consumer) explain two recurrent misconceptions about competition policy versus the media-sector in general, and the broadcasting sector specifically.

a) Firstly, one tends to ignore that even free mediatypes are primarily focused on the consumer market since audience is the pre-condition for access to the advertising market.

As a result the economic activity of the free media-types is erroneously reduced to the sole advertising market. In the HMG decision for instance, the Commission states expressis verbis that it is doubtful that the viewers market is an economic market strictu sensu, as there doesn’t seem to be a direct commercial relation between the viewers and the broadcasters. It remains an open question however to which other market the viewers market is supposed to belong. In the VTM decision the Commission totally ignores the viewers market by reducing the relevant market of a broadcaster to the sole advertising market.

Given the fierce competition between broadcasters to attract viewers or listeners there is no doubt that this is a real primary market, even if it doesn’t generate a direct income for the broadcasters. In addition it should be noted that the viewers market is starting to generate revenues for the broadcasters now that competition between the distributors of the signal (cable operators vs satellite platforms) is gradually increasing. This evolution also underlines that the distinction the Commission still makes between free-to-air television and pay-television as two separate relevant product markets, is questionable.

b) Secondly, one tends to subdivide the advertising market by way of the nature of the media types (which is correct for the consumer market) rather than by function of the nature of the publicity itself. This is clearly the case for television since the Commission defines its relevant product market as the "television advertising market".

If the subdivision of the advertising market by function of the vector would be the right conceptual approach, then there should also be something like a "newspaper advertising market", whereas in reality it is clear that newspapers carry different kinds of advertising messages, just like local radio or television.

It is true that national television carries mainly display advertising, but this is not sufficient reason to consider the "television advertising" as a relevant product market on its own. Companies that invest in display advertising have a vast choice of vectors available, be it media products, or not (e.g. billboards, direct mail, sales promotion etc.) There exists a large degree of substitution between those vectors, as witnessed by the important shift in revenues in those market places where commercial television or radio was recently introduced. This is certainly the case in small geographic markets where almost all media types offer a national reach.