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Competition Study – the Broadcasting Industry in Kenya Dissemination Workshop

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Competition Study – the Broadcasting Industry in Kenya Dissemination Workshop Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Competition Study – the broadcasting industry in Kenya Dissemination Workshop March 2012 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Contents Project scope Framework Assessment of competition Proposed measures 2 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Project Scope Objectives of Competition Study Study Objectives • Identify the various markets within Kenyan broadcasting industry, including the number and demographic of players • Establish the levels and extent of competition in the various broadcasting markets identified • Identify the market barriers, if any, that prevent competition and the growth of the players • Evaluate the effectiveness of the broadcast spectrum allocation to, and use by, broadcasters and suggest appropriate remedial interventions • Evaluate the extent of dominance and establish potential anticompetitive behaviour in the broadcasting market in general and specific market segments in Kenya • Review the effectiveness of the existing legal and regulatory framework in supporting a robust competition policy for the broadcasting sector; • Provide a proposal on the best ways by which the identified barriers and factors hindering growth can be eliminated; and • Identify possible regulatory areas of concern and recommend how they can be addressed. Summary of assessment framework 2. Establish 4. Evaluate 5. Review 6. Initial 1. Identify 3. Evaluate level of potential anti- effectiveness assessment of markets effectiveness competition competitive of legal and possible of spectrum and market behaviour regulatory measures/ allocation barriers framework recommendations 3 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Kenyan TV supply chain Various players operate across different levels of the supply chain Content Layer IPR holders Kenyan in-house Kenyan external production Foreign Production Major players: English production Example Players: Vivid Major players: East Premier League, Major players: KBC, Features, Sound & Picture Africa TV, BBC, CNN Confederation of DSTV Works, Dreamcatcher, Big Ideas Entertainment, Homeboyz African Football Channel Layer Commercial television Advertisers Public television Community Example players: KBC (Channel 2), KTN, Nation TV, Family TV, Citizen KBC Channel 1 television TV, Sayare TV, Channel 42, K24, DStv/CTN/Zuku (multiple channels), East Africa TV, Radio Africa Holdings, M-Net Policy & Regulatory Authorities Wholesale Distribution Layer •CCK •Competition Telecoms data Satellite operators Digital terrestrial Authority Cable operators Analogue networks Major players: Major players: KBC •Ministry of Major players: terrestrial Players: mobile Multi-choice, (Signet), Pan African Information & Zuku TV Major playerr: KBC operators Intelsat, SES S.A. Network Group ICT •Kenya Film Commission Retail Distribution Layer Free-to-air Subscription Analogue DTT Digital terrestrial TV transition Satellite TV terrestrial Major players: Cable TV IPTV & Subscription Major TV KBC (Channel Digital Major Mobile management IPTV players: Example I and II, KTN, terrestrial TV players: Major players: services DStv, Zuku players: Nation TV, Zuku TV Safaricom TV Smart TV, Citizen TV, Gotv (DStv) Family TV Subscription Consumer Consumer Consumer Consumer Consumers Consumers Consumers Consumers Consumers s s s s © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Kenyan Radio Supply chain Key broadcasters in Kenya have radio and TV activities Content Layer Kenyan external Kenyan in-house IPR holders production Foreign Production production Example players: Example players: Example players: BBC Example players: KBC Sports rights holders Dreamcatcher Policy & Radio Station Layer Regulatory Public radio Commercial radio Authorities Major player: KBC (multiple Example players: KBC Metro, Advertisers Community radio channels including KBC General Example players: Radio Nation Radio, Kiss FM, Citizen •CCK Service, KBC National Service, Mang’elete, Koch FM radio, Capital FM, Family FM, •Competition Luo, Coro) Inooro, Jambo Radio Authority •Ministry of Information & ICT Distribution Layer Analogue terrestrial Telecoms networks Major players: KBC Major players: Zain, Jamii Telecom, Safaricom Listeners Listeners Listeners Listeners Listeners © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Data Collection We have interviewed and collected data from the following Information/ Data Sources 4. Information from 1. Interviews with 2. Data 3. Desk-based the CCK/ other stakeholders questionnaires Research Kenyan regulatory authorities S. No. List of stakeholders Date of Interview S. No. List of stakeholders Date of Interview Kenya Broadcasting 1. Competition Authority 11 October 10. 2 November Corporation-Signet Ministry of Information and 2. 12 October 11. Zuku/Wananchi Group 3 November Communications 12. Koch FM 3 November 3. Dream Catcher Productions 26 October Kenya Television 13. 4 November 4. Safaricom 27 October Network 5. Digital Mobile TV 27 October 14. Royal Media Services 7 November 6. Nation Media Group 28 October 15. Scanad 7 November 7. Multichoice Kenya Limited 31 October 16. Smart TV 7 November 8. Radio Mangelete 1 November 17. Star FM 17 November 9. Radio Africa 1 November 6 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Market definition: summary Ten markets are identified along the broadcast supply chain Content Layer Free to air content market Pay TV content market 2 markets Channel / Radio station Layer Free to air radio Free to air TV Pay TV channels 3 markets stations market channels market market Wholesale Distribution Layer Cable (TV and Terrestrial (TV and Satellite (TV and radio) stations radio) stations radio) stations 3 markets market market market Retail Distribution Layer Free to air TV retail Pay TV retail market 2 markets Subscription Consumer Consumer Consumer Consumer Consumers Consumers Consumers Consumers Consumers s s s s In line with standard methodologies in competition analysis, markets have been identified by considering demand and supply-side substitution between services, as well as homogeneity of competitive conditions as appropriate 7 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Key issues investigated Focus issues of competition study Content Layer Broadcaster- producer terms of trade Channel Layer Spectrum KBC public allocations Competition service and Access to digital Cross- and regulatory commercial terrestrial signal ownership framework activities distribution Wholesale Distribution Layer Platform access to particular Retail Distribution Layer content Consumers Consumers Consumers Consumers Consumers 8 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Framework for deciding on prioritisation of regulatory measures The framework is consistent with international precedent 1 2 3 4 5 Potential Tendency Sufficiency competition Barriers to towards of How to issue entry effective competition intervene? identified competition law A set of regulatory measures that • Market with • High and non- • Prospectively • Risk of market • At which level of may be ineffective transitory competitive tilting? the supply chain? appropriate to competition? barriers to market? address entry? • Difficulty to • What type of distortions in • Single or address non- remedy? particular collective • Efficiencies competitive (behavioural, markets, market which offset behaviour structural, subject to dominance? competition amendments to further distortion? legislation/policy) investigation • Abuse of dominance? • Anti- competitive agreement? • Legal barriers? 9 © 2012 Deloitte & Touche. Private and confidential. Deloitte-LBG UK screen 4:3 (19.05 cm x 25.40 cm) Free to air radio market There are over one hundred radio stations in Kenya Share of Radio advertising revenue, by Group 40% • There is moderate concentration in the radio sector at the Group level 35% RMS 30% RADIO AFRICA • There are five main radio groups, with no player 25% NMG having a market share above 35-40% 20% KBC GROUP • There is also a long tail of independent radio 15% CAPITAL GROUP stations with shares below 5% 10% MEDIAMAX • At the regional level, approximately 8-12 radio 5% STG stations are listened at; 3-5 national stations are 0% SINGLE MEDIA 2006 2,007 2008 2009 2010 Jan-Sep typically available by region, together with a Source: Synovate 2011 number of regional stations Radio stations by region • Four national stations broadcast in Kiswahili (R Nairobi Central Lake Western Rift Coast No stations Citizen, KBC Kiswahili, Milele, Q FM) while some with active of the regional stations broadcast in vernacular listening 12 8 10 9 12 12 No national languages. Listeners have a choice of at least a stations 5 3 5 5 5 5 number of radio stations No regional stations 7 5 5 4 7 7 • Each radio Group negotiates a significant share Lower Upper South South North North of its revenue via between one and three Eastern Eastern Nyanza Rift Western Eastern advertising agencies, indicating that the radio No Groups face countervailing power stations with active • Our interviews indicated that the radio advertising listening 12 13 8 10 9 8 No national market is fiercely competitive
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