The UK’s Office of Fair Trading (OFT) has referred the anticipated acquisition by Ericsson of broadcast services provider Red Bee Media Limited (RBM) to the Competition Commission (CC).
After careful consideration, the OFT has found that the merger might lead to an increase in prices or a worsening of service levels in the supply of linear playout services in the UK.
The OFT notes that many broadcasters pay for linear playout services, which ensure that individual television programmes, advertising, and other television content are lined up and ready for broadcast, according to the programme schedule. Playout service providers also manage the fluctuations around the schedule according to the broadcaster’s wishes, for example in reaction to live sports.
In 2012, Ericsson acquired Technicolor Broadcast Services, which also offers playout services. Both Ericsson and RBM provide outsourced linear playout services to some of the largest broadcasters in the UK. RBM also provides a full suite of other ancillary services essential to supporting playout services and Ericsson provides certain ancillary services, mainly media logistics (converting tape content into digital format) and digital media services (provision of video on demand content with all the ancillary services).
The OFT found broadcasters’ requirements for linear playout services varied in complexity, based on a number of factors such as the degree of live content, number of channels and regional variations involved. On the basis of the evidence available, the OFT concluded that the parties competed closely to win contracts from broadcasters with the most complex category of requirements.
Although a minority of broadcasters provide playout services themselves, and all UK broadcasters self-supplied before 2005, the OFT did not consider that the threat to take these services back in-house would be sufficient to prevent prices from rising in the short to medium term. A number of broadcasters and competitors have complained about the merger and the loss of choice it entails.
The parties offered behavioural remedies in reaction to the OFT’s concerns, but the OFT considered that these were insufficient in terms of scope and certainty of outcome to offer a clear cut solution to its competition concerns.
Clive Maxwell, OFT Chief Executive and Decision Maker in this case said that not only was there the possibility of price rises as a result of the merger, there was a risk the most complex channels would suffer a reduction in quality in their service levels. “We are therefore referring the anticipated merger to the Competition Commission for an in-depth investigation.”
The CC is expected to report by 16 March 2014.