Background
Smart TVs, set-top boxes and other streaming devices have transformed how UK audiences watch TV. According to Ofcom’s findings, at the end of 2023, an estimated 86% of primary TV sets in use in the UK could be used to watch TV online. These devices contain or are plugged into software platforms (called connected TV platforms), which enable viewers to navigate the TV available to them over the internet and for content providers to distribute content online.
On 5 December 2024, Ofcom released an update on its review of the connected TV platform market (the “Market Update”). As a reminder, Ofcom has the power to impose access-related conditions on firms that have strong negotiating power over others that rely on their infrastructure. Where commercial negotiations fail, Ofcom may set access-related conditions to secure adequate access in the interests of end-users.
The Market Update examines how well competition between connected TV platforms is working: specifically, whether the current level of competition enables content providers to access a range of connected TV platforms. The Market Update also sets out features of the connected TV platform market which could pose future risks to competition.
This article sets out the main points from, and our thoughts on, the Market Update.
Summary of main points
The main points from the Market Update are as follows:
- Market context: Ofcom’s findings in respect of the market context for connected TVs are unsurprising, including that most major connected TV platform operators are vertically integrated with content production and/or aggregation services, which can affect market dynamics. However, of note is that no single operator has a share exceeding 25% of the market. The shares of the largest connected TV platform operators have increased steadily in recent years: the six largest operators accounted for more than 70% of supply in 2024, up from just under half of the market in 2019.
- Commercial agreements for distribution: Ofcom concludes that, in general, content providers are able to agree terms with connected TV platforms to secure the availability of their content. However, platform operators have varied relationships with content providers and Ofcom notes, rather unsurprisingly, that the opportunity to negotiate bespoke terms with connected TV platforms is more commonly available to the more popular content providers (as a result, more popular content providers tend to have better terms with connected TV platforms).
- Prominence: Ofcom finds that connected TV platforms and content providers may negotiate over a range of options for prominence. However, in line with the point above, content providers with a weaker bargaining position relative to the connected TV platforms may find it challenging to negotiate prominence, making it more difficult for those content providers to reach audiences online. Interestingly, Ofcom identifies elements of prominence to include not only app placement, pre-installations and dedicated rows/rails, but also hero banners, search integration, remote control buttons and on-pack logos.
- Self-preferencing: Ofcom also notes that self-preferencing (whereby a connected TV platform promotes its own content over a competitor’s content) is common in the connected TV platform market, which could affect competition between content providers and reduce consumer choice. That said, Ofcom has not actually evaluated the impact of self-preferencing on competition between content providers; rather, Ofcom’s opinion is based on “experiences in other digital markets”.
- Features of competition on connected TV platforms: Ofcom concludes the Market Update by highlighting the following features of the connected TV platform market that could hinder competition:
- Large platforms can benefit from network effects: content providers are more attracted to connected TV platforms with larger audiences and audiences are more attracted to connected TV platforms that offer a greater range of content. For similar reasons, connected TV platforms with a larger base of content providers are also more attractive to device manufacturers that choose to license a connected TV platform from a third party. Accordingly, according to Ofcom, there is a risk that content providers and device manufacturers may prefer to focus on these large connected TV platforms leading to ‘market tipping’.
- Incentive payments from platforms to device manufacturers: some connected TV platform operators offer payments to device manufacturers to encourage them to adopt the operator’s platform. The ability of large operators to incentivise device manufacturers to license their connected TV platforms may make it harder for smaller platforms to grow. Ofcom notes that, in its mobile ecosystems market study, the CMA concluded that certain payments to device manufacturers acted as a significant barrier to entry for new entrants and, in principle, similar concerns could arise in the connected TV platform market.
- Access to rich user datasets: large firms could seek to leverage their strengths in related digital activities to weaken the bargaining power of content providers; for example, a platform could combine user data from its multiple services to provide personalised ads on its connected TV platform, or to develop personalised content recommendations on that connected TV platform.
Next steps
Based on the findings set out in the Market Update, Ofcom is not considering using its powers to impose access-related conditions in respect of the connected TV platform market at this time. Instead, Ofcom intends on prioritising the Media Act rules by putting them into practice. However, Ofcom may draw on their findings in the Market Update to do so, and will continue to monitor the market in the coming years, intervening if necessary.
The CMS view
In summary, whilst it is an interesting read, the Market Update is very high-level, making it difficult to draw any meaningful conclusions from it.
However, in relation to prominence, we would expect Ofcom to draw on its Market Update analysis when drafting any codes of practice or guidance on the new PSB prominence rules (see the “Revised Prominence Regime” section of our Media Act Tracker here). As mentioned above, it is noteworthy that Ofcom identifies elements of prominence that go beyond just app placement, pre-installations and dedicated rows/rails. This implies a potential broad footprint for its implementation of the prominence rules.
Additionally, whilst Ofcom highlights various features of the connected TV market which could hinder competition, the Market Update suggests that the connected TV market is (at the moment) sufficiently competitive. We have discussed the UK’s new digital regime in some of our articles (see here), and it seems unlikely that any connected TV platform would receive a “strategic market status” designation under that regime: amongst other things, as mentioned above, no single operator has a share exceeding 25% of the market. That said, as Ofcom rightly notes, experience from other digital markets suggests that competitive conditions can change rapidly. Indeed, several stakeholders voiced concerns that the market could consolidate to platforms “operated by one or two tech firms”. Ofcom makes it abundantly clear in the Market Update that it will monitor developments in the connected TV platform closely, as will we.
We are staying up to date on the Government’s and Ofcom’s implementations of various aspects of the Media Act. To get our updates and stay informed, make sure to follow our Media Act Tracker.
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