Brussels, 11 November 2004
The European Commission has cleared, under the Merger Regulation, a joint venture, called MovieCo, which will offer a video-on-demand service in the United Kingdom and Ireland. The JV, created by US film studios Columbia Pictures and The Walt Disney Company together with UK company ON Demand Group, will create competition to the current dominant provider of Pay-tv content to the benefit of cable customers in the two countries.
The proposed concentration consists in the creation of a joint venture, called MovieCo, by Columbia Pictures Corporation Limited, belonging to the Japanese Sony group, The Walt Disney Company and UK company ON Demand Group. The joint venture will provide an open platform to which movie content providers will have access on a non-discriminatory basis, therefore enabling them to make films available by way of video-on-demand directly to customers within the two big UK cable networks Telewest and ntl.
The relevant activities of Columbia Pictures and Disney are mainly in the field of development and distribution of motion pictures. ON Demand Group is a company active in the management of transactional television services, including the launch and operation of pay-per-view and video-on-demand services.
The relevant markets for the proposed transaction are the market for the wholesale distribution of Pay-TV, pay-per-view (PPV) and video-on-demand (VOD) film channels, where cable operators procure video content to be fed into their networks (presently mainly from BSkyB), but also the retail market for video content. In vertical respect, also the markets for the supply of audio-visual content for pay-TV programming may be affected.
The Commission examined the transaction’s impact on the competitive structure of the market, and concluded that the JV will give the UK cable network operators an alternative to procure video content other than BSkyB, which is currently the dominant player on this market. With the creation of this new service, MovieCo will enhance competition on the retail level and will provide both additional choices and price competition for UK consumers.
The Commission also concluded to the absence of vertical integration concerns. This is because although Columbia Pictures and Disney have a significant position on the market for the supply of broadcasting rights for premium motion pictures, the joint venture will only be a minor competitor in the market for the wholesale distribution of pay-TV and video-on-demand channels compared to the dominant player BSkyB.
Furthermore, the purpose of the proposed transaction is to give third-party movie content providers access to the new platform on a non-discriminatory basis. This makes it very unlikely that Sony Pictures and Disney will engage in any foreclosure of other content providers by means or that the joint venture could achieve a dominant position on the market for the supply of broadcasting rights for premium motion pictures.