CELEX: 32014M7332
Language: en
Date: 2014-09-11 00:00:00
Title: Commission Decision of 11/09/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7332 - BSKYB / SKY DEUTSCHLAND / SKY ITALIA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 11.09.2014
C(2014) 6516 final

                                        [pic]

                                                                                               To the notifying party

Dear Sir/Madam,

Subject:    Case M.7332 – BSKYB / SKY DEUTSCHLAND / SKY ITALIA
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 6 August 2014, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation  (EC)  No
       139/2004 (1) by which the undertaking Sky Broadcasting Group plc ("BSkyB", United Kingdom) acquires within the meaning of Article  3(1)(b)
       of the Merger Regulation control of the whole of the undertakings Sky Deutschland AG ("Sky Deutschland", Germany) and  Sky  Italia  S.r.l.
       ("Sky Italia", Italy) by way of purchase of shares.[2] BSkyB, Sky Italia and Sky Deutschland together are designated  hereinafter  as  the
       "Parties".

       THE PARTIES

    2) BSkyB is a United Kingdom public company[3] active through a number of subsidiaries in a variety of audio-visual  sectors  in  the  United
       Kingdom and Ireland, namely the licensing / acquisition of audio-visual programming, the TV channel wholesale  supply,  the  retailing  of
       audio-visual programming to subscribers, the provision of technical platform services to broadcasters on BSkyB's DTH platform, the sale of
       TV advertising airtime and sponsorship, the retail provision of fixed telephony and broadband services, the provision of access to  public
       Wi-Fi hotspots, marketing services, and fixed-odds betting services. BSkyB has also minimal activities  outside  the  United  Kingdom  and
       Ireland, including the licensing and distribution of BSkyB and third party audio-visual programming, the provision  of  BSkyB's  Sky  News
       International, the provision of public internet access via Wi-Fi hotspots in various countries and the supply  of  set-top  boxes  to  Sky
       Italia.

    3) Sky Deutschland is a German media company active primarily in the pay TV sector. Its activities are predominantly limited to  Germany  and
       Austria, including retailing of subscription based pay TV services and the provision  of  on-demand  content.  To  a  lesser  extent,  Sky
       Deutschland also derives revenues from commercial subscriptions in bars and hotels, non-linear services (including  pay-per-view  ("PPV"),
       the activation and installation of Sky Deutschland receivers and the sale of advertising time.

    4) Sky Italia is an Italian media company active primarily in the TV sector in  Italy.  Its  activities  include  the  operation  and  retail
       distribution of linear and non-linear pay TV channels and content and a free-to-air (FTA)  TV  channel  across  a  range  of  transmission
       technologies. Sky Italia is also active in the sale of advertising and sponsorship on Sky Italia and third parties' linear TV channels.

       THE OPERATION

    5) The proposed transaction consists in the acquisition by BSkyB of sole control  over  Sky  Deutschland  and  Sky  Italia.  The  transaction
       comprises a single concentration under the Merger Regulation as BSkyB's acquisition of Sky Italia is conditional upon  completion  of  the
       Sky Deutschland acquisition.

       Sky Deutschland

    6) Sky Deutschland is currently solely controlled by Twenty-First Century Fox, Inc. ("21st Century Fox").  21st  Century  Fox  owns  a  57.4%
       economic and voting interest in Sky Deutschland. The remaining 42.6% of Sky Deutschland's shares are owned by a large  number  of  smaller
       shareholders.

    7) According to the share purchase agreement for Sky Deutschland signed on 25 July 2014, the transaction consists in the acquisition by BSkyB
       of the 57.4% of Sky Deutschland's shares owned by 21st Century Fox. In addition, BSkyB will make a voluntary cash takeover offer  for  the
       42.6% Sky Deutschland's shares not owned by 21st Century Fox.

    8) After the transaction, BSkyB will acquire sole control of Sky Deutschland whether or not BSkyB is successful in its  public  bid  for  the
       outstanding 42.6% share capital.

       Sky Italia

    9) Sky Italia is currently solely controlled by 21st Century Fox which owns 100% of its shares.

   10) According to the share purchase agreement for Sky Italia signed on 25 July 2014, the transaction consists in the acquisition by  BSkyB  of
       Sky Italia's entire issued corporate capital owned by 21st Century Fox.

   11) Through the transaction, BSkyB will therefore acquire sole  control  of  Sky  Deutschland  and  Sky  Italia.  The  proposed  concentration
       constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

   12) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[4] (BSkyB: EUR 9 147 million;  Sky
       Deutschland: EUR 1 546 million; Sky Italia: EUR 2 922 million). Each of them has an EU-wide turnover in excess of EUR 250 million  (BSkyB:
       EUR […]; Sky Deutschland: EUR […]; Sky Italia: EUR […]), and they do not achieve more than two-thirds of their aggregate EU-wide  turnover
       within one and the same Member State.[5]

   13) The notified operation therefore has an EU dimension.

       COMPETITIVE ASSESSMENT

1 Market definitions

   14) The activities to be considered in the audio-visual sector are (i)  the  licensing  and  acquisition  of  broadcasting  rights;  (ii)  the
       wholesale supply of TV channels; (iii) the retail supply of audio-visual programming; (iv) the supply of set-top boxes; and (v)  the  sale
       of TV advertising airtime.

1 Licensing / Acquisition of audio-visual programming

1 Product market definition

   15) In previous decisions, the Commission distinguished between the licensing /  acquisition  of  broadcasting  rights  for  pay  TV  and  the
       licensing / acquisition of broadcasting rights for FTA.[6] The Commission has  also  identified  separate  markets  for  the  licensing  /
       acquisition of distribution rights for (i) films; (ii) sporting events and (iii) other TV content.[7]

   16) The Notifying Party refers to the Commission's approach in previous decisions.  The Notifying Party refers to the overall sector of all TV
       and to separate pay TV and FTA markets.  Moreover, the Notifying Party refers to separate markets  for  the  licensing  /  acquisition  of
       films, sports and other TV content (both by pay TV and FTA as well as together for all TV).

   17) The Notifying Party notes that rights for films are typically licenced in  separate  (distinct  or  overlapping)  "windows".  Each  window
       corresponds to a time period for which studios have licenced the rights to distribute a film in a  certain  way.   The  number,  type  and
       duration of the release windows are independently and unilaterally set by each rights holder.

   18) Rights for major sports content are typically sold via a tender procedure to content  distributors  (channel  providers  and  subscription
       video on demand (SVOD) service providers) for live or ex post broadcasting, in full or in highlights form.  Rights  to  national  football
       league matches, such as the Premier League in the United Kingdom, Bundesliga in Germany and Serie A in Italy, are generally  licensed  for
       three to four seasons.

   19) Rights for other TV content are distributed via  less  complex  licensing  arrangements.  For  example,  made-for-TV  programming  may  be
       commissioned by a particular channel provider or SVOD service provider for initial exhibition on its own channels / services,  or  may  be
       produced by an independent producer and offered for licensing to all interested channel providers (whether FTA or pay TV) and SVOD service
       providers, with a view to being licensed exclusively for a given period to the successful bidder. Made-for-TV programmes that are licensed
       for broadcast are often also made available to viewers on a VOD basis at the same time as initial broadcast, soon after  in  a  "catch-up"
       service, or after a full series has aired by way of a "box-set" of the entire series. Once the initial licensee's rights  and  protections
       have expired, the licensor may license another channel provider to show repeats.

   20) The Notifying Party submits that given the clear lack of competition concerns arising from the transaction on any plausible product market
       definition, the precise boundaries of the relevant markets can be left open.

   21) The majority of respondents to the market investigation agree that the Commission's finding in previous cases that the product markets for
       the licensing of broadcasting rights can be categorised as broadcasting rights for (i) films, (ii)  sports  content  and  (iii)  other  TV
       programmes is still correct.[8]

   22) For the purposes of the present decision, the Commission considers that it is not necessary  to  conclude  on  the  exact  product  market
       definition as the proposed transaction does not raise any competition concerns under any alternative market definition for  the  licensing
       and acquisition of broadcasting rights to audio-visual programming.

2 Geographic market definition

   23) In previous decisions, the Commission considered the markets for the licensing /  acquisition  of  broadcasting  rights  to  be  generally
       national in scope or to comprise linguistically homogenous areas.[9]

       The Notifying Party's views

   24) The Notifying Party considers that its position is in line with the Commission's approach in previous decisions and submits that rights to
       audio-visual programming are generally licensed and acquired on a national or linguistic region basis, reflecting differences in language,
       culture and preferences and in economic conditions between territories.

   25) The Notifying Party submits that given the clear lack of competition concerns arising from the transaction  on  any  plausible  geographic
       market definition, the precise boundaries of the relevant markets can be left open.

       Results of the market investigation and the Notifying Party's response

   26) The majority of respondents to the market investigation agree that the past Commission decisional  practice  of  defining  the  geographic
       scope of markets for the licensing / acquisition of broadcasting rights as national in  scope  or  comprising  linguistically  homogeneous
       areas continues to be valid.  Several respondents to the market  investigation  refer  to  "the  different  regulatory  regimes,  existing
       language barriers, cultural factors and other  different  conditions  of  competition  prevailing  in  the  various  markets".[10]   Other
       respondents note that licenses have been granted on a territory by territory basis and that they expect licenses to continue to be granted
       on this basis. Normally a distributor licenses contents that reflect audiences' preferences in the area of reference also aiming to  reach
       the widest audience related to the language. As far as sports rights are concerned, the market respondents submit that  these  rights  are
       sold on a country by country basis. Indeed, the national scope of rights is also enhanced by the "listed events" as applicable in each  EU
       Member State, which further differentiates the major events (sports and non-sports  events)  in  accordance  to  their  relevance  to  the
       national public.

   27) Two respondents refer to the judgment of the Court of Justice in the joined  cases C-403/08 Football Association Premier  League  Ltd  and
       Others v QC Leisure and Others and C-429/08 Karen Murphy v Media Protection Services Ltd  (the  "Murphy  judgment")  in  relation  to  the
       development of multi-territorial negotiations and licensing of rights. In the Murphy  judgment,  the  Court  remarked  that  the  Football
       Association Premier League (FAPL) grants licences in respect of those broadcasting rights for live transmission, on  a  territorial  basis
       and for three year terms. Those rights are awarded to broadcasters under an open  competitive  tender  procedure  which  begins  with  the
       invitation to tenderers to submit bids on a global, regional or territorial basis. Demand then determines the territorial basis  on  which
       the FAPL sells its international rights. However, as a rule, that basis is national since there is only a limited demand for  bidders  for
       global or pan-European rights, given that broadcasters usually operate on a territorial basis and serve  the  domestic  market  either  in
       their own country or in a small cluster of neighbouring countries with a common language.[11]

   28) These two respondents submit that the proposed transaction is apt to change this scenario. The  proposed  transaction  will  lead  to  the
       creation of a European player, able  to  bid  for  pan-European  broadcasting  rights.  According  to  these  respondents  to  the  market
       investigation, for the first time, on the demand side, a multi-country group, with enormous negotiating power,  will  face  the  licensing
       parties and will be interested in offering on a much wider territorial basis. By doing so, the merged  entity  could  secure  pan-European
       rights. The merged entity could directly exploit such rights in the countries where it operates as a pay TV company (such  as  the  United
       Kingdom, Ireland, Germany, Austria and Italy) and sub-licence the same rights in the other countries where it is not interested in  direct
       exploitation.

   29) The Notifying Party does not consider that the Murphy judgment is expected to have material actual or potential implications, as  it  does
       not establish any new principles in relation to multi-territorial licensing.  The Notifying Party argues that the Court of Justice in  the
       Murphy judgment applied the principles set out previously in Case 262/81 Coditel SA, Companie générale pour la diffusion de la  television
       and others v Ciné-Vog Films SA and others (Coditel II) to a specific obligation on broadcasters not to supply  decoding  devices  enabling
       access to satellite broadcasts of Premier League matches in commercial premises. The Notifying Party  submits  that  the  Murphy  judgment
       concerned only the satellite broadcasting of Premier League matches to the public  by  broadcasting  organisations.  The  Notifying  Party
       submits that there is no sound basis to infer, from the conclusions reached in the Murphy judgment, broader principles of law, capable  of
       application to different sets of facts.

   30) In addition, the same two respondents to the market investigation submit that the current market situation could change as  a  consequence
       of the evolution of EU regimes and policies, such as the "Licence for Europe" progress, which could contribute to the developing  of  pan-
       European licensing patterns.

   31) The Licence for Europe process is a stakeholder dialogue, brokered by the European Commission, in  an  attempt  to  overcome  problems  in
       relation to cross-border access and portability of services, user-generated content and micro-licensing, audio-visual  heritage  and  text
       and data mining. In relation to cross-border portability of audio-visual services, the process has led to a joint statement of the  audio-
       visual industry to continue working to make it easier for consumers to legally access films and TV programmes from their home Member State
       when travelling abroad on holidays or business trips.

   32) The Notifying Party does not consider that the Licence for Europe process has any implications in relation to any potential development of
       multi-territorial negotiations and licensing of rights. The Licence for Europe process is focusing on "portability" (i.e.  the  consumers'
       ability to access content to which they have subscribed in their home EU Member State when travelling to other Member States), rather than
       multi-territorial negotiation and licensing of rights to provide a single service on a cross-border basis.

   33) The Notifying Party submits that, since the Murphy judgment, the relevant rights holders have each continued to sell rights on a territory-
       by-territory basis, both within the EEA and throughout the rest of the world, through separate tender processes held at  different  times,
       even in relation to major pan-European / global events. Examples include the licensing by UEFA in respect of the Champions League,  Europa
       League and the Centralised Qualifiers for Euro 2016 and the FIFA World Cup 2018, the Football Association Premier League for the 2013/2014
       – 2015/16 seasons, FIFA in respect of the FIFA World Cups 2014, 2018 and 2022, Formula One Management in respect  of  Formula  1  for  the
       years 2012 – 2018 and Wimbledon until at least 2017. According to the Notifying Party, the list of sports rights holders which continue to
       license their rights on a national basis is clear evidence that sports rights are still licensed predominantly on a national  basis  post-
       Murphy judgment.

   34) The Notifying Party is aware of only  a  small  number  of  instances  where  global  providers  of  audio-visual  content  services  have
       simultaneously acquired rights for a number of territories. These instances are not the norm and relate  predominantly  to  over  the  top
       ("OTT") windows and/or the licensing of international rights either with low residual value or those intended for further distribution  to
       third parties outside the home territory.  The Notifying Party argues that these are not rights that, on  their  own,  would  induce  many
       customers to subscribe to a broadcaster's offering and do not, therefore, have a meaningful impact  on  competition  between  broadcasters
       and/or OTT content providers.

   35) On this basis, the Notifying Party submits  that  the  market  for  the  licensing  of  audio-visual  programming  is  national  or  among
       linguistically homogeneous areas and that neither the Murphy judgment nor the Licence  for  Europe  initiative  have  any  impact  on  the
       geographic market definition.

       The Commission's assessment

   36) The Commission notes that in recent previous decisions, such as Case M.6866 Time Warner / CME[12], Case M.6880  Liberty  Global  /  Virgin
       Media[13] and Case M.6396 HBO / Ziggo / HBO Nederland,[14] which were decided post-Murphy judgment, the Commission found that  the  market
       for the licensing of audio-visual content is national in scope.

   37) In the Liberty Global / Virgin Media decision, the market investigation revealed  that  the  geographic  scope  of  the  markets  for  the
       licensing of broadcasting rights for individual audio-visual TV content (films, sports, other  TV  content)  is  mainly  national  or  may
       sometimes cover linguistically homogeneous areas (for example the United Kingdom and Ireland). Generally the  respondents  to  the  market
       investigation indicated that cultural, linguistic and other demand differences are the factors due to which  the  contracts  are  normally
       negotiated and concluded on a national basis (or for linguistically homogeneous areas which in that decision covered  the  United  Kingdom
       and Ireland).[15]

   38) In the Time Warner / CME decision, the market investigation indicated that in the countries of Central and Eastern Europe (i.e.  Bulgaria,
       the Czech Republic, Romania, Slovakia, Slovenia and to a lesser extent Hungary, which were the EEA Member States around which  the  market
       investigation focused), broadcasting rights for audio-visual content were generally licensed on a national basis. While  there  were  some
       exceptions, the majority of film studios and production companies indicated that they license their audio-visual  content  to  TV  channel
       broadcasters on a country by country basis.  Different primary languages spoken in each country, as well as differing consumer tastes were
       mentioned in that investigation as factors which may prevent or hamper cross-border negotiations and / or cross-border licensing of rights
       to audio visual content.[16]

   39) The Commission assessed the responses to the market investigation in the present case, which largely confirm the current practice  of  the
       rights holders and broadcasters to negotiate and license audio-visual programming  rights  on  a  territory-by-territory  basis  or  along
       linguistically homogeneous borders on the basis of the audience's preferences in the  area  of  reference.  The  majority  of  respondents
       consider that the market should be defined as national or across linguistically homogeneous areas.

   40) The same rationale applies to the licensing of sports rights. Sports rights are often consumer-led and  certain  consumers  in  particular
       Member States, regions or language groups wish to receive geographically or linguistically distinct services which are tailored  to  their
       collective preferences. Different sports vary widely in popularity across the EEA. In the case of football all countries in the  EEA  have
       domestic football leagues which are typically more popular in their home nation than abroad. Therefore, the desire of consumers to watch a
       specific football league outside of their domestic league varies enormously from Member State to Member State. This is especially true  in
       the countries in continental Europe with the strongest domestic leagues, such as Germany and Italy.

   41) The Commission notes that even the respondents who submit that the Murphy judgment and the License for Europe  may  alter  the  geographic
       scope for rights negotiations and licensing consider that currently the geographic market  is  still  national  or  across  linguistically
       homogeneous areas. These respondents mainly take the view that the situation could potentially evolve in the future.

   42) The Commission has investigated whether currently multi-territorial negotiations and licensing are practiced  across  territories  in  the
       EEA. Currently, the licensing of rights remains predominantly national  /  linguistically  homogeneous.  The  Commission  has  found  that
       licensing on a multi-territorial basis is not common.[17]

   43) The Commission also notes that […] This indicates to the Commission that the current market for the  acquisition  of  audio-visual  rights
       remains at this stage national or at most across linguistically homogeneous areas.

   44) In light of the above and for the purposes of the present decision, the Commission concludes that the geographic scope of the markets  for
       the licensing / acquisition of broadcasting rights is national or, at most, relates to linguistically homogeneous areas covering  Germany,
       Austria, Italy, the United Kingdom and Ireland.

2 Wholesale supply of TV channels

1 Product market definition

   45) In previous decisions, the Commission identified wholesale markets for the supply of TV channels, in which channel broadcasters and retail
       TV distributors negotiate the terms and conditions for the distribution of TV channels.[18] The Commission considered that there  are  two
       separate markets for (i) the wholesale supply of FTA channels and (ii) the wholesale supply of pay TV channels.[19]

   46) In previous decisions, the Commission left open whether the market should be segmented by genre or thematic content (such as channels  for
       films, supports, documentaries, youth, news, etc.).[20]

   47) The Notifying Party considers that the aggregation of content into TV channels and supply of TV channels of all  types  to  third  parties
       comprise part of a wider relevant market between the upstream licensing of content and  downstream  retail  distribution  of  audio-visual
       services.  According to the Notifying Party, there is competition in the market from a range of other audio-visual products  and  services
       that all serve a common consumer demand for audio-visual entertainment and information in a broad range of programming genres.

   48) The Notifying Party notes the Commission's market definition in past decisions and considers that it follows this approach in the Form CO.
       The Notifying Party submits that the market for the wholesale supply should not be segmented by genre.

   49) The Notifying Party further submits that given the clear lack of competition concerns  arising  from  the  transaction  on  any  plausible
       product market definition, the precise boundaries of the relevant markets can be left open.

   50) The Commission notes that the Parties have very limited overlaps in their activities, even on the narrower markets of wholesale pay TV and
       FTA channels.

   51) For the purposes of the present decision, the Commission considers that it is not necessary  to  conclude  on  the  exact  product  market
       definition as the proposed transaction does not raise any competition concerns under any alternative market definition for  the  wholesale
       supply of TV channels.

2 Geographic market definition

   52) In previous decisions, the Commission has considered the market for the wholesale supply of TV channels to be generally national in  scope
       or to comprise linguistically homogeneous areas.[21]

   53) The Notifying Party considers that the geographic scope of the market is national and states that the analysis  would  not  be  materially
       different if these markets were combined into linguistically homogeneous regions. The Notifying Party submits that  each  of  the  Parties
       acquires on a wholesale basis TV channels for retail distribution in distinct territories and in separate geographic markets.

   54) The Notifying Party considers that competition for the wholesale supply of TV channels to pay TV operators occurs primarily on a  national
       basis, and that competitive conditions among suppliers of channels are broadly  homogeneous  throughout  a  national  territory.  In  some
       limited cases, TV channels are supplied outside a national market, for example, news channels  to  serve  expats  /  immigrants  or  in  a
       language well understood in the supplied territory. However, such viewing is de minimis.

   55) The Commission notes that in recent previous decisions, such as Case M.6866 Time Warner / CME,[22] Case M.6880  Liberty  Global  /  Virgin
       Media[23] (covering the United Kingdom and Ireland) and Case M.6396 HBO /  Ziggo  /  HBO  Nederland[24]  (covering  the  Netherland),  the
       Commission found that the market for the wholesale supply of TV channels is national in scope.

   56) In the Liberty Global / Virgin Media decision, the market investigation showed that the agreements for the wholesale supply of TV channels
       were, as a general rule, negotiated on a national basis (in that case covering the United Kingdom and Ireland). This was partly  explained
       by the fact that TV retailers mostly have a national footprint. More rarely, these agreements were negotiated for  several  Member  States
       which usually share the same language (for example the United Kingdom and Ireland). Negotiations on a wider  basis  appear  to  be  rather
       exceptional.[25]

   57) In the Time Warner / CME decision, the market investigation indicated that pay TV operators do not tend to operate  on  a  multi-territory
       basis, and as such, negotiations between the suppliers of TV channels and  TV  retailers  were  rarely  multi-territorial  (in  that  case
       covering Bulgaria, the Czech Republic, Romania, Slovakia, Slovenia and Hungary). This view  was  supported  by  a  number  of  factors  in
       addition to the linguistic differences across the relevant countries: (i) the rights to broadcast TV channels are obtained for  the  whole
       of a national territory; (ii) the appeal of audio-visual content depends on national tastes, culture and preferences; (iii) advertising on
       channels is not sold on a multi-territory basis; (iv) marketing, promotion and advertising of channels tends to take account  of  national
       differences and consumer preferences and tends to be executed nationally; and (v) channels negotiate carriage  fees  separately  for  each
       country.[26]

   58) The market investigation in the present case confirms the  prevalence  of  these  factors  today.  National  preferences  are  still  very
       important, in relation to movies, sports and other content which make up TV channels, which in turn affects the value of TV  channels  and
       the marketing and promotion strategy. In addition, TV advertising still operates on a national basis in the relevant  EEA  Member  States,
       such as Germany, Austria, Italy, the United Kingdom and Ireland.

   59) The Commission has investigated the cross-border licensing of TV channels and found that it was not common. There  is  currently  no  pan-
       European dimension to the wholesale supply of TV channels and as a rule, agreements are negotiated and concluded on a  national  basis  or
       for a linguistically homogeneous area.

   60) One of the reasons why negotiations for the wholesale supply of TV channels are typically carried out  nationally  is  that  channels  are
       mainly local with limited appeal to other EU Member States, due to language and cultural differences.

   61) In light of the above and for the purposes of the present decision, the Commission considers that the geographic scope of the  market  for
       the wholesale supply of TV channels is national or, at most, relates to linguistically homogeneous areas.

3 Retail distribution of audio-visual programming to consumers

1 Product market definition

   62) In previous decisions, the Commission has taken the view that all technical means of television distribution compete with each  other  and
       has not identified separate relevant product markets for television distributed via digital terrestrial (DTT), satellite, cable,  internet
       TV (IPTV), over-the-top (OTT) and mobile technologies.[27]

   63) In previous decisions, the Commission also considered that the retail supply of pay TV to end users constitutes a separate product market.
       [28]

   64) The Notifying Party considers that the relevant retail market is for the provision of all audio-visual programming to end users on both  a
       pay TV and FTA basis, regardless of distribution technology and mode of delivery.

   65) For the purposes of the present decision, it is not necessary to  conclude  on  the  exact  product  market  definition  as  the  proposed
       transaction does not raise any competition concerns under any alternative market definition for the retailing of audio-visual  programming
       to consumers.

2 Geographic market definition

   66) In previous decisions, the Commission considered that the geographic scope of the retail market for audio-visual programming to  consumers
       is national in scope or comprises linguistically homogeneous areas.[29]

   67) The Notifying Party considers that the geographic scope of the market is national and states that the analysis  would  not  be  materially
       different if these markets were combined into linguistic regions.

   68) In light of the above and for the purposes of the present decision, the Commission considers that the market for the  retail  distribution
       of audio-visual programming to consumers is national or, at most, relates to linguistically homogeneous areas covering  Germany,  Austria,
       Italy, the United Kingdom and Ireland.

4 Supply of set-top boxes

1 Product market definition

   69) In previous decisions, the Commission concluded that the supply of set-top boxes constitutes a distinct product market from other  pay  TV
       technical services.[30]

   70) The Notifying Party considers that its position is in line with the Commission's approach in previous cases but considers that the precise
       market definition can in any event be left open in this case.

   71) For the purposes of the present decision, it is not necessary to  conclude  on  the  exact  product  market  definition  as  the  proposed
       transaction does not raise any competition concerns under any alternative market definition for the supply of set-top boxes.

2 Geographic market definition

   72) In previous decisions, the Commission considered that the geographic scope for the supply of set-top boxes is at least  EEA-wide,  if  not
       global, but left the precise geographic market definition open.[31]

   73) The Notifying Party considers that the relevant market is at least EEA-wide, if not global. Set-top boxes are distributed  globally  by  a
       number of large international distributors, including Technicolor, Humax, Pace, Arris-Motorola, Cisco, EchoStar and Samsung. In any event,
       the Notifying Party submits that the exact scope of the relevant geographic market can be left open in this case.

   74) For the purposes of the present decision, it is not necessary to conclude on the  exact  geographic  market  definition  as  the  proposed
       transaction does not raise any competition concerns under any alternative market definition for the supply of set-top boxes.

5 Sale of TV advertising airtime

1 Product market definition

   75) In previous decisions, the Commission defined a relevant product market for the sale of TV advertising airtime.[32]

   76) The Notifying Party submits that the relevant market may be broader in scope due to the increasing constraint of internet advertising.

   77) For the purposes of the present decision, it is not necessary to  conclude  on  the  exact  product  market  definition  as  the  proposed
       transaction does not raise any competition concerns under any alternative market definition for the sale of TV advertising airtime.

2 Geographic market definition

   78) In previous decisions, the Commission considered that the geographic scope for the supply of TV advertising airtime is  national.[33]  The
       Commission considered that the relevant geographic market is not wider than national and is not along  linguistically  homogeneous  areas.
       For example, the Commission found in Case M.5932 – News Corp/BSkyB that the relevant geographic market did not comprise  both  the  United
       Kingdom and Ireland.

   79) The Notifying Party considers that its position is in line with the Commission's approach in previous decisions.

   80) For the purposes of the present decision, it is not necessary to conclude on the  exact  geographic  market  definition  as  the  proposed
       transaction does not raise any competition concerns under any alternative market definition for sale of TV advertising airtime.

2 Competitive assessment

1 Horizontal assessment

1 Licensing / Acquisition of audio-visual programming

   81) The Parties are predominantly active in distinct geographic markets in relation to the licensing / acquisition of audio-visual programming
       for pay TV and FTA. BSkyB is mainly active in the United Kingdom and Ireland with minor activities in other countries (including  Germany,
       Austria and Italy), Sky Deutschland is mainly active in Germany and Austria and Sky Italia is mainly active in Italy.  The  only  overlaps
       arise in the markets for the licensing / acquisition of audio-visual programming in Germany, Austria and Italy,  but  not  in  the  United
       Kingdom and Ireland, as Sky Deutschland and Sky Italia are not active in the United Kingdom and Ireland.

   82) Within the markets for the licensing / acquisition of audio-visual programming for pay TV and FTA in Germany, Austria and Italy which  are
       national or among linguistically homogeneous areas, the merger would not lead  to  any  horizontally  affected  markets  on  any  relevant
       markets. Sky Deutschland's market share is less than 20% in Germany and Austria. Sky Italia's market share is less than 20% in  Italy  and
       BSkyB's market share in all three countries is [0-5]%.

   83) The Commission therefore concludes that the proposed transaction does not raise serious doubts as to its compatibility with  the  internal
       market on the markets for the licensing/acquisition of broadcasting rights in Germany, Austria and Italy.

2 Wholesale supply of TV channels

   84) The Parties are predominantly active in distinct geographic markets in relation to the wholesale supply of TV channels for pay TV and FTA.
       BSkyB is mainly active in the United Kingdom and Ireland, Sky Deutschland is mainly active in Germany and Austria.  Sky  Italia  has  some
       very minor activities in the wholesale supply of pay TV and FTA channels in Italy.  The  only  overlaps  arise  in  the  markets  for  the
       wholesale supply of pay TV and FTA channels in Germany, Austria and Italy, but not in the United Kingdom and Ireland, as  Sky  Deutschland
       and Sky Italia are not active in the wholesale supply of pay TV and FTA channels the United Kingdom and Ireland.

   85) BSkyB's channel, Sky News International is available on a FTA basis on the Astra satellite, and can therefore  be  received  by  consumers
       with the appropriate reception equipment in a number of countries throughout Europe, including Germany, Austria and Italy.  […].

   86) Within the markets for the wholesale supply of pay TV and FTA channels in  Germany,  Austria  and  Italy,  which  are  national  or  among
       linguistically homogeneous areas, the merger would not lead to any horizontally affected markets on any relevant markets.  Sky Deutschland
       and Sky Italia have limited activities on these markets. BSkyB's Sky News International generates […] and has an audience  share  of  less
       than [0-5]% on these markets.

   87) The Commission therefore concludes that the proposed transaction does not raise serious doubts as to its compatibility with  the  internal
       market on the markets for the wholesale supply of TV channels in Germany, Austria and Italy.

3 Retailing of audio-visual programming to consumers

   88) The Parties are predominantly active in distinct geographic markets in relation to the retailing of audio-visual programming to consumers.
       BSkyB is mainly active in the United Kingdom and Ireland, Sky Deutschland is mainly active in Germany and Austria and Sky Italia is mainly
       active in Italy. The only overlaps arise in the markets for the retailing of audio-visual programming to consumers in Germany, Austria and
       Italy, but not in the United Kingdom and Ireland, as Sky Deutschland and Sky Italia are not active in the United Kingdom and Ireland.

   89) Concerning the markets for the retailing of audio-visual programming in Germany and Austria the merger does not lead to  any  horizontally
       affected markets as Sky Deutschland's market share is less than 20% by subscribers and by revenue  in  Germany  and  Austria  and  BSkyB's
       market share through the provision of Sky News International is [0-5]%  in  audience.  Moreover,  […]  Sky  News  International  which  is
       available FTA in Germany and Austria.

   90) In Italy, Sky Italia has [10-20]%  subscriber share but [30-40]%  revenue share in the retailing of audio-visual programming. However, the
       market share of BSkyB in Italy through the provision of Sky News International has  an  audience  share  around  [0-5]%   and  […].  Thus,
       considering the market share by audience, the combined market share is less than 20%. In terms of revenue, Sky  Italia  has  [30-40]%  but
       there is no increment, as […] Sky News International which is broadcast FTA.

   91) The Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal  market  on
       the markets for the retailing of audio-visual programming to consumers in Germany, Austria and Italy.

4 Supply of set-top boxes

   92) BSkyB is active in the supply of set top boxes in the EEA and worldwide.  BSkyB has a market  share  of  [0-5]%  in  the  EEA  and  [0-5]%
       worldwide.  However, the proposed transaction will not lead to any horizontally affected markets as Sky Deutschland and Sky Italia are not
       active in the supply of set top boxes.

   93) The Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal  market  on
       the market for the supply of set-top boxes in the EEA or worldwide.

5 Sale of TV advertising airtime

   94) The Parties are active in the markets for the sale of TV advertising airtime which are national. There is no  geographic  overlap  in  the
       Parties' sales of TV advertising.  BSkyB primarily sells TV advertising in the United  Kingdom  and  Ireland.  Sky  Deutschland  sells  TV
       advertising on its channels in Germany and Austria. Sky Italia sells TV advertising on its channels  in  Italy.  Therefore,  the  proposed
       transaction will not lead to any horizontally affected markets.

   95) The Commission concludes that the proposed transaction does not raise serious doubts as to its compatibility with the internal  market  on
       the market for the sale of advertising airtime in the United Kingdom, Ireland, Germany, Austria, and Italy.

2 Non-horizontal assessment

1 Vertical effects

       Licensing / acquisition of audio-visual content

   96) The proposed transaction would combine the activities of BSkyB as an upstream licensor of audio-visual content with the activities of  Sky
       Deutschland as a downstream retailer of audio-visual programming in Germany and Austria and  with  the  activities  of  Sky  Italia  as  a
       downstream retailer of audio-visual programming in Italy.

       Germany

   97) In the retail sector for all TV in Germany, Sky Deutschland has [5-10]% by audience (measured by the number of households) and [10-20]% by
       revenue. In the pay TV market in Germany, Sky Deutschland has [10-20]% by subscribers and [30-40]% by revenue.

   98) However, given that BSkyB's market share in the licensing of audio-visual content is [0-5]% in Germany,  BSkyB's  upstream  share  in  the
       licensing of audio-visual content is negligible. Therefore, the proposed transaction  does  not  give  rise  to  any  vertically  affected
       markets.

       Austria

   99) In the retail sector for all TV in Austria, Sky Deutschland has [5-10]% by audience (measured by the number of households) and [10-20]% by
       revenue.  BSkyB only licenses content to FTA broadcasters in Austria, so there is no vertical overlap on any pay TV market.

  100) In any event, given that BSkyB's market share in the licensing of audio-visual content is [0-5]% in Austria, BSkyB's upstream share in the
       licensing of audio-visual content is negligible. Therefore, the proposed transaction  does  not  give  rise  to  any  vertically  affected
       markets.

       Italy

  101) In the retail sector for all TV in Italy, Sky Italia has [10-20]% by audience (measured by the  number  of  households)  and  [30-40]%  by
       revenue.  In the pay TV market in Italy, Sky Italia has [60-70]% by subscribers and [70-80]% by revenue.

  102) BSkyB has very small licensing revenue of other TV content, predominantly to FTA broadcasters, and to sports-related content only  to  pay
       TV broadcasters. The revenue is de minimis, approximately EUR […] which leads to an estimated market share of [0-5]%.

  103) Therefore, the merger creates a vertically effected market on the basis of  Sky  Italia's  shares  for  the  acquisition  of  content  for
       broadcast on pay TV, the acquisition of sports content and / or pay TV retail supply. However, given that  BSkyB's  market  share  in  the
       licensing of audio-visual content is [0-5]% in Italy, BSkyB's upstream share in the licensing  of  audio-visual  content  is  de  minimis.
       Therefore, the proposed transaction does not give rise to competition concerns.

  104) The Commission concludes that the proposed transaction does not raise serious doubts as to its  compatibility  with  the  internal  market
       arising from the vertical relationship between BSkyB's activities for the licensing of audio-visual content and the downstream  activities
       of Sky Deutschland and Sky Italia as retailers of audio-visual programming in Germany and Austria and Italy, respectively.

       Supply of set-top boxes

  105) The proposed transaction would combine the activities of BSkyB as an upstream supplier  of  set-top  boxes  with  the  activities  of  Sky
       Deutschland as a downstream retailer of audio-visual programming in Germany and Austria and  with  the  activities  of  Sky  Italia  as  a
       downstream retailer of audio-visual programming in Italy.

  106) However, given that BSkyB's market share of set-top boxes supply upstream are  [0-5]%   on  an  EEA-basis  and  [0-5]%  worldwide  BSkyB's
       upstream share of the supply of set-top boxes is negligible. Therefore, the proposed transaction does not  give  rise  to  any  vertically
       affected markets.

  107) The Commission concludes that the proposed transaction does not raise serious doubts as to its  compatibility  with  the  internal  market
       arising from the vertical relationship between BSkyB's activities for the supply of set-top boxes and the  downstream  activities  of  Sky
       Deutschland and Sky Italia as retailers of audio-visual programming in Germany and Austria, and Italy, respectively.

2 Conglomerate effects

  108) BSkyB is the leading pay TV operator in the United Kingdom and Ireland. Through the proposed  transaction,  it  acquires  control  of  two
       leading pay TV providers in Italy (Sky Italia) and in Germany and Austria (Sky Deutschland). Therefore, the proposed  transaction  extends
       the presence of the BSkyB group to three additional EEA Member States, i.e. Germany, Austria and Italy.  The Commission  examined  whether
       any conglomerate effects result from the merger in relation to the acquisition of rights to audio-visual content,  in  particular  premium
       content as well as with respect to the acquisition of TV channels for its pay TV programmes, for different territories of the EEA  by  the
       merged entity.

  109) The Notifying Party submits that in 2013, BSkyB has approximately 9.7 million subscribers and holds a market share in retail pay TV of [50-
       60]% in terms of subscribers and [70-80]%  in terms of revenues in the United Kingdom. Pay TV competitors include Virgin/  Liberty  Global
       ([10-20]%  by revenues, [10-20]%  by subscribers) and BT ([0-5]%  by revenues, [10-20]%   by  subscribers).  In  Ireland,  BSkyB  has  […]
       subscribers and holds a market share in retail pay TV of [50-60]% in terms of subscribers and  [50-60]%  in  terms  of  revenues.  Pay  TV
       competitors include UPC/ Liberty Global ([30-40]%  by revenues, [30-40]%  by subscribers), and Setanta ([0-5]% by revenues and  [0-5]%  by
       subscribers).

  110) According to the Notifying Party, on the basis of 2013 data, Sky  Italia  has  4.6  million  subscribers  and  holds  a  market  share  of
       approximately [60-70]% in terms of subscribers and 77.8% in terms of revenues in the retail pay TV  market  in  Italy.  Its  main  pay  TV
       competitor is Mediaset (19.1% by revenues, [20-30]%  by subscribers).[34]

  111) On the basis of 2013 data, Sky Deutschland has approximately […] subscribers in Germany and holds market shares of approximately  [10-20]%
       in terms of subscribers and [30-40]% in terms of revenues in the retail pay TV markets in Germany. Its main pay TV competitors  are  Kabel
       Deutschland/ Vodafone ([20-30]% by revenues, [30-40]% by subscribers), Unity Media/ Liberty Global  ([20-30]%  by  revenues,  [20-30]%  by
       subscribers), and Deutsche Telekom ([20-30]% by revenues, [5-10]% by subscribers). In Austria, Sky Deutschland  has  […]  subscribers  and
       holds a market share of approximately [20-30]% in terms of subscribers and [20-30]% in terms of revenues in the retail pay TV market.  Its
       main pay TV competitors include UPC / Liberty Global ([40-50]%  by revenues, [30-40]% by subscribers), Liwest Kabelmedien  GmbH  Pay  ([5-
       10]% by revenues and [5-10]% by subscribers), A1TV/ Telekom Austria Pay ([5-10]% by revenues, [10-20]%  by subscribers) and KabelPlus ([5-
       10]% by revenues and [5-10]% by subscribers).

  112) The Commission has examined whether the proposed transaction could increase BSkyB's negotiating power in relation to licensors  of  audio-
       visual content including premium films and pan-European / international sport events,[35] as well as TV channel  suppliers,  by  combining
       negotiations and contracts in different territories across the EEA. The  Commission  has  also  examined  whether  any  such  increase  in
       negotiating power would result in other content distributors being de facto cut off from the negotiation process for  key  content,  which
       could in turn strengthen the merged entity's position in each national retail pay TV market.

       The Notifying Party's view

       Audio-visual programming

  113) First, the Notifying Party submits that, although the merged entity would be active in the acquisition of audio-visual  content  in  three
       separate geographic markets in the EEA (United Kingdom / Ireland, Germany / Austria and Italy), this would  not  enhance  its  ability  to
       access third party rights in these territories. There have not been any material changes in licensing  practices  since  the  Commission's
       decision in News Corp/BSkyB. The licensing / acquisition of rights to audio-visual content continues to be largely  confined  to  national
       territories or linguistically homogeneous areas.

  114) For premium films, this is partially explained by language and cultural differences, as well as by differences between territories: (i) in
       valuation of the rights by different broadcasters and OTT operators, in turn reflected in a number of differences including in box  office
       success from country-to-country; (ii) in the specific rights granted, for example differences in the content licensed, volume commitments,
       licence fees, licence periods, and in the number of permitted runs, and  (iii)  in  staggered  expiry  dates  of  the  existing  licensing
       agreements. Factors (ii) and (iii) would make it impractical for the merged entity to submit consolidated multi-territory  bids  absent  a
       willingness of rights holders to synchronise tenders.

  115) As regards premium sports content, the existence of cross-border deals for sports content continues to be limited in  practice,  primarily
       because the content supplier varies from country to country, and is generally interested principally in selling rights for  exhibition  of
       its content in its own home territory (where consumer interest in  the  content  is  greatest).  Rights  to  other  territories  are  sold
       separately, either bundled together and sold to multi-national broadcasters or often through rights agencies  that  negotiate  the  onward
       license of rights. Licenses for sports events of interest beyond their home territory (for example the Olympic Games and  football  events
       held intermittently such as the World Cup Finals, or the UEFA Euro Finals) are each sold on a national basis.

  116) Second, the merged entity would not have the incentive to implement a multi-territory licensing strategy that results in bidding more  for
       rights across multiple territories than the sum of what it would have bid for the rights in each of those territories. Even  if  a  rights
       holder were inclined to invite bids for multi-territory rights, the merged entity would only have an incentive to bid the amount that  the
       rights are worth by reference to its actual or potential subscriber base in each of the  territories  in  which  it  operates  (primarily,
       Austria, Germany, Ireland, Italy and the United Kingdom). Since the actual / potential subscriber base across  those  countries  does  not
       change as a result of the transactions, the value of the rights would not increase. Furthermore, BSkyB has not identified any synergies on
       the basis of combined rights acquisition but has identified a number of synergies in terms of streamlining of operating and  other  costs.
       Any efficiencies obtained including through managing a single contract would be immaterial.

  117) Third, the Notifying Party submits that the merged entity will continue to face sophisticated  rights  holders  that  have  countervailing
       bargaining power – including the Hollywood studios and holders of rights to premium sports events. Even if purchasers  wanted  to  acquire
       rights on a cross-territorial basis, they would only be able to do so if the relevant rights holders considered this to be the best way to
       maximise their revenues.

  118) Fourth, even if the rights owners' licensing model were to change and they were to license rights on a pan-European basis in  the  future,
       the merged entity would face strong competition for rights from a number of operators, including national pay TV and  FTA  broadcasters  –
       who could form bidding consortia for multi-territory bids – as well as international competitors some of which have a  broader  geographic
       coverage than that of the merged entity (such as Liberty Global that is active in 12 European countries, or RTL that is active 8  European
       countries).

       Wholesale supply of TV channels

  119) In relation to any conglomerate effects arising from the wholesale supply of TV channels across different  territories  in  the  EEA,  the
       Notifying Party submits that the arguments in paragraphs (113) to (118) above also apply in this case.

  120) The Notifying Party submits that cross-border licensing of TV channels is not common. As a general  rule,  agreements  for  the  wholesale
       supply of TV channels are negotiated nationally. The reason for this is that channels are mainly local, with no or limited appeal in other
       EU Member States. Channels differ across the territories. Often the channel providers produce  the  content  for  their  channels  in  the
       country for which it is destined and / or at least buy local productions. In addition, the content is tailored to  the  specific  European
       language. Even if a channel is available in multiple territories, the programming and its scheduling / assembly on the channels  would  be
       different in the different national versions.

  121) The Notifying Party claims that the vast majority of the TV channels retailed by each of the Parties are local channels broadcast  in  the
       relevant territory's language which are not suitable for, and as a result are not in fact retailed in, other territories. As  such,  there
       is no scope for multi-territorial  distribution  (and  hence  acquisition)  of  such  local  channels  and  the  potential  concern  would
       hypothetically only arise in relation to channels which are distributed in the United Kingdom as well as the territories of Sky Italia and
       Sky Deutschland.

  122) The Notifying Party submits that even those channels licensed by large international groups operating in  multiple  territories,  such  as
       Disney, Viacom and Discovery are negotiated on a national  basis,  reflecting  differences  in  popularity  of  a  channel  and  different
       conditions of competition in national downstream retail markets. Moreover, the expiry dates of the Parties' current  channel  distribution
       agreements with each of the wholesale channel suppliers differ significantly. The staggered expiry of the existing licence agreements is a
       further reason why licensing of the rights to distribute channels generally takes place on a territorial  basis  and  why  multi-territory
       offers / negotiations would be unlikely.

  123) Finally, the Notifying Party submits that the merged entity will not have the ability to foreclose competing  TV  channel  suppliers  from
       accessing BSkyB's subscriber base in the United Kingdom due to BSkyB’s regulatory obligations to grant third party channels access to  its
       DTH platform on fair, reasonable and non-discriminatory terms (FRAND)[36]. Therefore, a pay TV channel has the option of self-retailing by
       entering into electronic programming guide (EPG) and conditional  access  (CA)  agreements  with  BSkyB,  or  enter  into  a  distribution
       arrangement with a third party pay TV retailer who could obtain EPG and CA services on their behalf.

       Results of the market investigation

  124) The majority of respondents to the market investigation submit that the current geographic licensing  practice  is  national  or  at  most
       across linguistically homogeneous areas and that it was likely to remain such in the future.[37]

  125) However, some respondents to the market investigation raise concerns with respect to the merged entity's possible role in particular  with
       respect to the acquisition of rights to audio-visual content on a multi-territorial basis.

       Audio-visual programming

  126) Two respondents raise concerns that post-transaction, BSkyB will be able to successfully bid higher amounts for pan-European  broadcasting
       rights than its competitors in particular for attractive sports and premium film content. By bidding higher amounts for exploiting  rights
       in EEA Member States where broadcasting competition is stronger and lower amounts in other countries, the merged entity could exclude  its
       more local competitors from the national pay TV market(s).

  127) On the other hand, some respondents submit that to the  extent  that  the  transaction  would  result  in  a  shift  to  multi-territorial
       acquisition of rights, the merged entity's bargaining power toward rights holders may grow. The respondents submit that the merged  entity
       may become an "unavoidable trading partner" on the basis of its strong position on national pay TV markets, such as the United Kingdom. On
       a multi-territorial basis, the merged entity might be able to extract lower license fees and/ or more favourable conditions  for  instance
       with respect to the scope or duration of the rights.

  128) Finally, in relation to premium films, a respondent raised the concern that the merged entity could,  post-merger,  have  the  ability  to
       require exclusivity in relation to pay per view ("PPV") / transactional video on demand ("TVOD") rights.

       Wholesale supply of TV channels

  129) A respondent to the market investigation raised the concern that the merged entity could introduce exclusivity into the contracts for  its
       acquisition of Basic Pay TV content at the wholesale level, especially towards important pan-European channel operators.

       The Commission's assessment

       Audio-visual programming

  130) While it has always been possible for rights holders to grant multi-territorial licenses, the market investigation  has  established  that
       rights are predominantly granted on the basis of national borders or across linguistically homogeneous areas (see section 4.1.1.2  above).
       Therefore, the relevant question is whether the merged entity would be able to change rights  holders'  predominant  geographic  licensing
       practice and establish either multi-territorial licenses or link negotiations in  various  territories  with  the  effect  of  foreclosing
       competing broadcasters.

  131) First, from a practical point of view, there appears to be limited possibility of bidding across a number of  territories  simultaneously,
       or linking bids for several territories. The Commission reviewed the timeline for the negotiations of major  pan-European/  global  sports
       events,[38] and it appears that many sports rights owners require the submission of separate bids for each territory, on different  dates,
       and possibly using different processes such as auctions/ tenders and private negotiations.

  132) Moreover, certain sports content rights, including a number of pan-European / global sports events of great public interest, are currently
       covered by "Listed Events" regimes transposed from the EU Audio-visual Media Services Directive.[39]  This  regime  provides  that  Member
       States can define certain events that cannot be broadcast on an exclusive basis, in order to ensure that a substantial proportion  of  the
       public in that country has the opportunity to view the event live on FTA television.[40] Therefore, these sports events  cannot  be  shown
       exclusively on pay TV.

  133) A review of the existing contracts of the Parties with the six major Hollywood film studios supports  the  Notifying  Party's  claim  that
       expiry dates are staggered – in some cases by two years or so – between the same studio and each of BSkyB, Sky Deutschland, and Sky Italia
       (to the extent that the entity has a licensing contract in place with the respective studio).  Moreover,  licensing  agreements  concluded
       between the Parties and the same studio differ with respect to the length of licensing  periods,  the  categories  of  content  and  their
       definitions (which is often in reference to the theatrical, home video or electronic sell through success in the particular  territory  in
       which the rights are granted), and the number of permitted runs by category of content. These existing divergences established  by  rights
       holders make pan-territory bids impractical or linkages between negotiations highly unlikely.

  134) Second, it is unlikely that rights holders would deviate from their current preferred model of licensing largely territory-by-territory or
       by linguistic area and/or synchronise their bidding contests and contracts across multiple territories unless it is in their  interest  in
       terms of maximizing revenues. Rights holders – in particular those holding rights for premium  sports  and  premium  film  content  –  are
       sophisticated operators with attractive and often unique content.[41]

  135) One respondent to the market investigation argues that the merged entity could bid for rights such as major sports events of  pan-European
       interest on a pan-European basis and then sub-licence rights in the countries where it is not present. The Commission  notes  that  rights
       holders are likely to pursue such a strategy only if the transaction costs to directly licence their rights in  all  European  territories
       would be higher than the revenues from licence fees that they could obtain. Transaction costs are unlikely to  be  higher  than  licensing
       revenues in cases where the content is capable of having an important effect on competition in the retail pay TV market. For such content,
       rights holders are unlikely to have an intermediary – such as the merged entity – deriving a margin from sub-licencing  their  content  if
       they could directly licence the content more profitably. Therefore, it is unlikely that groups with a  multi-territorial  footprint  would
       bring about a shift in existing licencing practices for premium content towards pan-European licensing  that  include  a  sub-license  for
       territories where a broadcaster is not present.

  136) Furthermore, the Commission observes that pre-merger, there are  already  a  number  of  broadcasters,  such  as  Liberty  Global  or  Sky
       Deutschland and Sky Italia, which operate in groups across various territories in the EEA. Nevertheless, rights holders do not  appear  to
       have established, or accepted, the practice of multi-territorial licensing to any meaningful extent, or  to  have  aligned  their  bidding
       processes or contract terms. In its News Corp/BSkyB decision,[42] the Commission found  that  Sky  Italia  and  Sky  Deutschland  had  not
       appeared to engage in joint bidding for rights in the countries where they are mainly active (Italy, Germany, and Austria)  despite  being
       in the same group. In the present proceedings, […][43]

  137) Third, even assuming that rights owners were to license rights on a pan-European  basis,  the  merged  entity  would  in  any  event  face
       competition for multi-territory rights from a number of other pay TV operators, including  other  multinational  groups  whose  geographic
       scope partly overlap (such as Liberty Global that – out of the five countries in the merged entity's footprint – is a pay TV  operator  in
       the UK, Ireland, Germany and Austria and is present in eight more European countries). Moreover, national or regional pay TV  broadcasters
       could form consortia to bid for pan-European rights.

  138) Even if the merged entity had the ability to engage in multi-territory strategies due to its presence in multiple  territories,  it  would
       need to be shown that it has the incentive to do so and that such a strategy would lead to foreclosure of its competitors in  the  various
       national pay TV markets.

  139) As regards in particular the first concern expressed in the market investigation, that is that the merged entity would bid, in  aggregate,
       higher amounts for premium rights for several territories compared to separate bids for the same  territories,  the  Commission  notes  in
       addition that it is questionable that this strategy would be economically plausible  and,  in  any  event,  would  constitute  a  relevant
       competition concern.

  140) First, the value of the bid is based mainly on how rights can be recouped in terms of  sales  at  the  retail  level  in  each  country  /
       linguistically homogeneous area separately, based on the subscriber base. However, the number of subscribers  in  each  country  does  not
       change as a result of the transaction to recoup this investment. In other words, already pre-merger, the Sky entities could bid more money
       for content in their respective home territories. Second, to the extent that the   merged  entity  can  submit  higher  bids  for  premium
       content, this is not anti-competitive. Third, it is rational for rights holders to evaluate potential  longer  term  consequences  of  the
       allocation of exclusive rights. For instance, they could forego – and the market investigation revealed an example for such  action   –  a
       relatively small amount of revenue in the short term by allocating license  packages  to  two  or  more  broadcasters  even  if  a  single
       broadcaster had bid more for the combined package, in order to avoid a potential situation of monopsony which could reduce right  holders'
       revenues in the longer term.[44]

  141) As regards in particular the second concern expressed in the market investigation, that is that the merged entity would force  the  rights
       holders to bundle the rights in multi-territorial licenses and award them to the merged entity by exercising its strong  bargaining  power
       and bidding a lower combined amount for the package than it would have for separate rights, the Commission notes a  number  of  additional
       observations.

  142) First, the Commission notes that a number of respondents to the market investigation who expressed this concern pointed out  at  the  same
       time that such concern was speculative.

  143) Second, the Commission reviewed BSkyB's relevant internal documents assessing  synergies  of  the  transaction.  While  BSkyB  anticipates
       synergies of GBP […], none of those are related to negotiations with rights holders. […][45][…][46] In any event, these  efficiencies  are
       very small compared to the identified efficiencies in procurement, as well as to the overall efficiencies ensuing from the transaction.

  144) Third, none of the respondents to the market investigation have articulated the reason why rights holders would be  willing  to  negotiate
       and contract on a multi-territorial basis for a value that is lower than the sum of the price for each territorial licence that they could
       achieve. Rights holders have the incentive and expertise to maximise revenues in return for licensing their content, in particular if  the
       content is attractive to end users.

  145) As regards in particular the concern expressed with respect to PPV/TVOD rights, the Commission notes in addition that unlike linear pay TV
       and SVOD services, content in the PPV/TVOD windows generates license fee revenue only for the particular title  selected  by  the  viewer.
       Hollywood studios, therefore, generally have an incentive to, and do, license PPV/TVOD rights on a non-exclusive basis as it is  important
       for the content to be widely available through as many delivery points as possible to reach the widest number of  customers  possible  and
       maximize returns from each title. Given the rights holders countervailing power, it is unlikely that, post-merger, the merged entity would
       be so strong as to undermine the non-exclusive licensing structure for PPV/TVOD in its favour by insisting on exclusive PPV/TVOD rights.

  146) Moreover, the respondents' concern relates in particular to the leveraging of BSkyB's alleged market power to the  Italian  and/or  German
       and Austrian market. PPV/TVOD rights granted to BSkyB are currently non-exclusive in the United Kingdom.[47] It is implausible that, while
       BSkyB has not sought to impose, or succeeded in imposing, exclusivity in the United Kingdom, it could succeed in doing so, post-merger, in
       other countries of the merged entity's footprint. For completeness, the Commission notes that […].

       Wholesale supply of TV channels

  147) As regards the concern that the combination between the Parties would strengthen the merged  entity's  buyer  power  in  multi-territorial
       negotiations with (Pay) TV channel providers across  different  Member  States,  the  Commission  does  not  consider  that  the  proposed
       transaction would likely lead to the merged entity being able to  obtain  significantly  better  terms  and  conditions  from  TV  channel
       suppliers due to its increased geographic footprint and/or that, as a result, the merged entity’s competitors  in  the  retail  supply  of
       audio visual content to end users would be foreclosed from the market.

  148) First, the Commission did not find any evidence in BSkyB's internal documents that the Notifying Party anticipated cost savings  from  the
       proposed transaction stemming from future negotiations with TV channel broadcasters (see paragraph (143) above for  more  details  on  the
       efficiencies anticipated by BSkyB).

  149) Second, as discussed in more detail in section 4.1.2.2 above, multi-territorial  negotiations  between  content  providers  /  TV  channel
       suppliers and pay TV retailers are the exception rather than the rule. Rather, the geographic scope of the market for the wholesale supply
       of TV channels is national or, at most, relates to linguistically homogeneous areas. Many TV channels broadcast local content that  is  of
       limited interest to the public in other countries / linguistic areas. According to the Notifying  Party,  the  vast  majority  of  the  TV
       channels retailed by each of the Parties are local channels broadcast in the relevant territory's language. These would not seem  suitable
       for distribution in other territories. For instance, according to the Parties, all channels  broadcasted  on  Sky  Deutschland,  with  the
       exception of Eurosport, are national/ local and have been created for the German market.

  150) Third, to the extent that multi-territorial negotiations  with  TV  channel  broadcasters  occasionally  happen  or  could  happen,  these
       negotiations would likely be mainly with a limited number  of  international  groups,  such  as  Disney,  Viacom  or  Time  Warner.  These
       international groups are likely to enjoy countervailing bargaining power, in particular if  they  also  own  rights  to  other  attractive
       content such as premium films.

  151) Fourth, the Commission notes the Parties' representation that […] Moreover, for channels licensed by large international groups  operating
       in multiple territories such as Disney, Viacom and Discovery, the terms of agreements by Sky Italia and Sky Deutschland, although part  of
       the same group, vary.  For example, while Sky Italia […],  Sky  Deutschland  […].  The  expiry  dates  of  the  Parties'  current  channel
       distribution agreements with each of the wholesale channel suppliers differ significantly (up to two years).

  152) Fifth, the Commission notes that the respondent to the market investigation  raising  the  concern  presently  discussed  is  particularly
       concerned about the merged entity leveraging its alleged market power in the United Kingdom into other territories of the merged  entity's
       footprint. However, in the United Kingdom, BSkyB does not have exclusive distribution rights to any of  the  channels  the  merged  entity
       would distribute in more than one territory. It would be implausible that BSkyB could use its alleged market power in the United  Kingdom–
       where it has not sought or succeeded in imposing exclusivity – for the purpose of requesting exclusivity in  another  territory  (such  as
       Germany, Austria or Italy).

       Conclusion

  153) In light of the above, the Commission concludes that the combination of BSkyB’s presence as a  leading  pay  TV  operator  in  the  United
       Kingdom and Ireland with Sky Deutschland and Sky Italia's presence as leading pay TV operators in Germany,  Austria  and  Italy  does  not
       raise serious doubts as to its compatibility with the internal market in relation to a possible increased bargaining power as regards  the
       negotiation and acquisition of rights to audio-visual programming content or TV channels in the United Kingdom and  Ireland,  Germany  and
       Austria, as well as Italy.

       CONCLUSION

  154) For the above reasons, the European Commission has decided not to oppose the notified operation and to  declare  it  compatible  with  the
       internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

For the Commission
 (signed)                                                      Joaquín ALMUNIA
Vice-President

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.
[2]   Publication in the Official Journal of the European Union No C 267, 14.08.2014, p. 27.
[3]   Twenty-First Century Fox owns a minority share of 39.14% of BSkyB's shares (with voting rights capped at 37.19%). It does not have de  jure
or de facto control over BSkyB. See also Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BSkyB, paragraphs 7-24.

[4]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation.
[5]   BSkyB derived more than two-thirds of its EU-wide turnover in  the  United  Kingdom  in  the  financial  year  ending  30  June  2014.  Sky
Deutschland […] in the financial year ending 31 December 2013. Sky Italia derived more than two-thirds of its EU-wide turnover in  Italy  in  the
financial year ending 30 June 2013.
[6]   Commission decision of 02.04.2003 in Case  COMP/M.2876  -  Twentieth  Century  Fox/Telepiu;  Commission  decision  of  13.07.2010  in  Case
COMP/M.5779 – Comcast/NBC Universal; Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BSkyB.
[7]   Commission decision of 13.07.2010 in Case COMP/M.5779 – Comcast/NBC Universal.
[8]   Questionnaire to right-holders, question 3. A minority of respondents consider that all the different genres of  audio-visual  content  are
capable of being regarded as substitutes for each other.  Content acquirers can switch part of their budget from one type of content to  another.
 Therefore, these  respondents submit that the licensing of broadcasting rights can be categorised as broadcasting rights for all forms of audio-
visual content.
[9]   Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BSkyB.
[10]  Questionnaire to right-holders, question 4; response referring to Commission decision of 07.10.1996 in Case IV/M.779, Bertelsmann/CLT.
[11]  This is confirmed by the respondents to the market investigation.  Questionnaire to right-holders, questions 4-8.

[12]  Commission decision of 14.06.2013 in Case COMP/M.6866 - Time Warner/CME.
[13]  Commission decision of 15.04.2013 in Case COMP/M.6880 – Liberty Global / Virgin Media.
[14]  Commission decision of 21.12.2011 in Case COMP/M.6369 – HBO / Ziggo / HBO Nederland.
[15]  Paragraphs 21 to 24.
[16]  Paragraphs 28 to 31.
[17]  Any multi-territory deals with OTT operators apply to an extremely minor part of the catalogues of such players.

[18]  Commission decision of 14.06.2013 in Case COMP/M.6866 - Time Warner/CME.
[19]  Commission decision of 15.04.2013 in Case COMP/M.6880 – Liberty Global/Virgin Media; Commission decision of 21.12.2010 in Case  COMP/M.5932
– News Corp/BSkyB.
[20]  Commission decision of 14.06.2013 in Case COMP/M.6866 - Time Warner/CME.
[21]  Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corps/BSkyB; Commission decision of 15.04.2013 in Case COMP/M.6880  –  Liberty
Global/Virgin Media.
[22]  Commission decision of 14.06.2013 in Case COMP/M.6866 - Time Warner / CME.
[23]  Commission decision of 15.04.2013 in Case COMP/M.6880 – Liberty Global / Virgin Media.
[24]  Commission decision of 21.12.2011 in Case COMP/M.6369 – HBO / Ziggo / HBO Nederland.
[25]  Paragraphs 38 to 41.
[26]  Paragraphs 52 and 53.
[27]  Commission decision of 15.04.2013 in Case COMP/M6880 – Liberty Global/Virgin Media.
[28]  Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BskyB; Commission decision of 15.04.2013 in  Case  COMP/M6880  –  Liberty
Global/Virgin Media.
[29]  Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BskyB; Commission decision of 15.04.2013 in Case  COMP/M.6880  –  Liberty
Global/Virgin Media.
[30]  Commission decision of 23.07.2012 in Case COMP/M.6568 – Cisco Systems/NDS Group.
[31]  Commission decision of 23.07.2012 in Case COMP/M.6568 – Cisco Systems/NDS Group.
[32]  Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BSkyB.
[33]  Commission decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BSkyB.
[34]  In addition, Mediaset has 1.7 million pre-paid cardholder customers that have not been included in the total market  size  of  6.8  million
subscribers.
[35]  As regards sports, the market investigation focused mainly on pan-European/international sport events (such as the football World  Cup  and
the UEFA Champions League). Such events have a pan-European interest from the viewers’ perspective (see Case  COMP/M.2876  –  News  Corp/Telepiù,
Commission decision of 2 April 2003, paragraph 72). National sport events on the other hand appear  to  have  more  limited  appeal  outside  the
country which they relate to (see Case COMP/M. 5121 – News Corp/Premiere, Commission decision of 25 June 2008, paragraph 24) and therefore it  is
less relevant to the conglomerate analysis undertaken here. This is also applicable to other  TV  content,  which  tends  to  be  of  more  local
interest (see Case COMP/M.6880 – Liberty Global/Virgin Media).
[36]  For conditions on BSkyB's electronic programming guide (EPG) see paragraph 9 of Schedule 18 to the Communications Act 2003, 23  July  2003,
which carried over the previous regulatory regime by means of a continuation notice. For conditions  on  conditional  access  (CA  services,  see
"Regulation of conditional access: Setting regulatory conditions, explanatory statement and formal notification pursuant  Section  48(1)  of  the
Communications Act 2003” published by Oftel on 24 July 2003. Ofcom's 2006 Technical Platform Services (TPS) Guidelines set out  its  approach  to
considering, in the event of a dispute or complaint, whether BSkyB has complied, amongst others, with its obligations to provide  access  to  EPG
and CA services. See Ofcom, Provision of Technical Platform Services, Guidelines and Explanatory  Statement,  21  September  2006,  available  at
http://stakeholders.ofcom.org.uk/binaries/consultations/tpsguidelines/statement/statement.pdf. The system is reviewable by Ofcom in the event  of
any complaint but TPS charges are set by BSkyB and not by Ofcom. According to Ofcom’s TPS Guidelines, ‘the costs that Sky should be  entitled  to
recover from TPS customers should be restricted to costs which it reasonably, necessarily and efficiently incurs  in  the  provision  of  TPS  to
those customers or in order to develop and operate the DSat platform.’
[37]  Questionnaire to right-holders, question 4.

[38]  Events included the recent UEFA champions' leagues, FIFA World Cup, Winter Olympic games,  the  tennis  tournaments  Wimbledon  and  French
Open, Formula 1 and Tour de France.
[39]  Directive 2010/13/EU of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or  administrative  action  in
Member States concerning the provision of audiovisual media services (the Audio-visual Media Services Directive), L 95/1, 15.04.2010.

[40]  For instance, United Kingdom, Irish, German, Austrian and Italian legislation all list the Olympic games (except winter  Olympic  games  in
Ireland), and all or part of the football games of  the  FIFA  World  Cup  Finals  Tournament  and  the  European  Football  Championship  Finals
Tournament, as well as at least the final game of the Champions league (except in the United Kingdom).
[41]  See also Commission decisions of 21.12.2010 in Case COMP/M.5932 –  News  Corp/BskyB,  paragraph  180  and  of  January  25,  2010  in  case
COMP/M.5734 – Liberty Global Europe/UnityMedia, paragraph 59 (citing respondents to the market investigation).
[42]  Commission Decision of 21.12.2010 in Case COMP/M.5932 – News Corp/BskyB, paragraph 184.
[43]  […].
[44]  Both in the United Kingdom and in Italy, two operators in each country have secured rights to exclusively broadcast certain football  games
in the respective leagues (Premier League and Seria A) during the same licensing period.
[45]  […] See Annex 5.3.6 to the Form CO, slide 7.
[46]  See Annex 5.3.14 to the Form CO, slides 3 and 6, and Annex 5.3.23, slide 11.
[47]  […].

-----------------------
                                                                  PUBLIC VERSION

 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                 MERGER PROCEDURE