Provisional Findings Report Has Been Placed on The
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APPENDIX A Terms of reference and conduct of the inquiry Terms of reference 1. On 30 September 2013, the OFT sent the following terms of reference to the CC: 1. In exercise of its duty under section 33(1) of the Enterprise Act 2002 (‘the Act’) to make a reference to the Competition Commission (the ‘CC’) in relation to an anticipated merger the Office of Fair Trading (the ‘OFT’) believes that it is or may be the case that – (a) a relevant merger situation has been created in that: i. arrangements are in progress or in contemplation which, if carried into effect, w ill result in enterprises carried on by or under the control of Creative Broadcast Services Holdings (2) Limited ceasing to be distinct from enterprises carried on by or under the control of Telefonaktiebolaget LM Ericsson (PUBL); and ii. as a result, the condition specified in section 23(1) of the Act is satisf ied, in that the value of the turnover in the United Kingdom of Creative Broadcast Services Holdings (2) Limited exceeds £70 million. (b) the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services, including the supply of linear playout services. 2. Therefore, in exercise of its duty under section 33(1) of the Act, the OFT hereby refers to the CC, for investigation and report within a period ending on 16 March 2014, the following questions in accordance with section 36(1) of the Act: A1 (a) Whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and (b) if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services. (signed) Clive Maxw ell Office of Fair Trading 30 September 2013 Interim measures 2. On 12 December 2013, we accepted interim undertakings from the parties and published these on the CC website shortly thereafter. Conduct of the inquiry 3. We published biographies of the members of the Inquiry Group conducting the inquiry. The administrative timetable for the inquiry was published on the CC website on 18 October 2013, and updated on 24 January. 4. We received written evidence from Technicolor and RBM. A non-sensitive version of the parties’ joint main submission can be found on the CC website. 5. On 1 November 2013, members of the Inquiry Group, accompanied by staff, visited Technicolor’s UK playout facilities at Chiswick Park and RBM’s playout facilities at BBC Broadcast Centre in West London to see the operation of the two businesses. 6. We received written evidence from the BBC, Deluxe, and one other company. A2 7. We invited a wide range of interested parties to comment on the acquisition. These included customers of the main parties, competitors and potential competitors. Evidence was obtained through oral hearings with third parties, through telephone contacts and through further written submissions. All summaries of hearings can be found on our website. 8. An issues statement was published on our website on 6 November 2013, setting out the areas of concern on which the inquiry would focus. 9. We held separate hearings with Technicolor and RBM on 13 December 2013. 10. In the course of our inquiry, we sent to Technicolor and RBM and other parties some working papers and extracts from those papers for comment, and to check for accuracy and confidentiality. 11. On 19 February, the inquiry group published a notice of extension to extend the statutory deadline to 11 May 2014. 12. A non-confidential version of the provisional findings report has been placed on the CC website. 13. We would like to thank all those who have assisted in our inquiry so far. A3 APPENDIX B Industry background Introduction 1. The parties are both active in the broadcast services industry, which encompasses a number of discrete and overlapping products and services that are purchased by broadcasters to facilitate transmission of programming in an appropriate format and quality. 2. This appendix sets out: (a) the nature of services that the parties and their competitors may provide to broadcasters; (b) a discussion of linear playout including: (i) the use of outsourced linear playout providers by large broadcasters; (ii) the nature and content of contracts between providers of playout services and broadcasters; and (iii) the service quality that playout providers must achieve; (c) relevant aspects of regulation that broadcasters must comply with; and (d) an overview of significant participants in the outsourced linear playout market and the overlap in service provision between the two parties. The broadcasting services industry Broadcasting services 3. A number of services are required before television programmes can be transmitted and ultimately viewed by audiences. B1 4. All of the services are required to allow transmission of programming in the correct format or to comply with regulatory requirements. These can be grouped into five broad categories of service:1 (a) Content provision. Content provision is principally the responsibility of broad- casters and includes all material that is broadcast and includes programmes, adverts and ‘idents’.2 Content may be pre-recorded or may be broadcast live. Content may be commissioned from third parties or produced in-house. Content provision by companies providing broadcast services will typically be focused on producing channel idents and trailers.3 (b) Media logistics. Content may be supplied to broadcasters in a variety of digital and analogue formats. In order for it to be broadcast, this content needs to be captured and stored in an appropriate format to be played out.4 This includes a process of quality control to ensure that the source material and stored material is of appropriate quality (including both picture and audio quality and that the picture and audio are synchronized). Depending on the arrangement made, the content may be stored on the broadcaster’s or the third party provider’s system. (c) Access and metadata: (i) Access services relate to the provision of subtitling and on-screen signing for those with hearing impairments and audio description for those with visual impairments. Access service requirements differ according to the broadcast licence of each channel (these are discussed further in paragraph 25) and may need to be provided live for unscripted live television programmes such as the news. To provide subtitles, a provider will employ staff to transcribe live or pre-recorded dialogue (if no script is available) and in the case of recorded programmes synchronize it with the audio track to ensure that subtitles 1 These categories are those used by the OFT in its decision document. 2 ‘Idents’ are short clips played between programmes to identify the broadcasting channel. 3 Some companies active in broadcasting services such as Portland TV will also produce adverts or offer studio and production facilities for producing programmes. 4 This process includes ‘ingestion’ where content is loaded onto the library system and encoded (converted from an analogue source to digital) or transcoded (converted from one digital format to another). B2 appear at the correct time.5 In the case of audio description the provider will employ a narrator to describe the visual content without overlapping dialogue. For on-screen signing, a signer will be filmed signing the dialogue and will be superimposed on the picture. (ii) Metadata refers to information about the content of a programme. The level of detail included in metadata will vary; in the first instance metadata allows the broadcaster or playout provider to identify specific content on an electronic media library system to facilitate playout. Metadata is also used to generate programme information for the electronic programme guide that will be displayed on televisions and will be provided to publishers of television listings.6 Metadata services providers may be required to generate this data through summarizing content, or may attach existing information to content, or produce databases to exploit the metadata attached to a media library, or extract metadata in an appropriate format for third parties.7 (d) Playout services. We discuss playout in paragraphs 5 to 7 below. (e) Distribution. Once playout has been performed, the output of the playout process needs to be distributed to the various providers of transmission (terrestrial antenna transmission, satellite, fibre-optic cable and Internet television) through the use of a high-speed data connection to the transmitter’s hub. Linear and non-linear playout services 5. Playout is the provision of programming in a format ready for transmission and viewing by a viewer. The provision of playout for the purposes of scheduled 5 Providers need to ensure that subtitles appear for an appropriate duration and without disrupting too much of the picture. In addition, for live subtitling a provider will need to ensure accuracy and this may require a balance between verbatim transcription and paraphrasing. 6 For example, this information might include a description of the content of the programme. 7 Such parties might be television listings magazines. Different platforms (Freeview, Sky, Virgin Media) may include additional information in their EPG, such as the series and episode number of a scheduled programme. This information can drive features such as ‘series link’ which allows a viewer to record all episodes of the same series, or may allow a recommendations engine to suggest programmes a viewer might wish to watch based on viewing habits. B3 broadcast television is referred to as ‘linear playout’ and for the purposes of ‘on- demand’ viewing online as ‘non-linear playout’. Linear playout 6. Linear playout is a process whereby content is compiled and prepared for subse- quent transmission to the audience in strict compliance with the broadcaster’s programme schedule.