The CNMC urges Telefónica to modify its agreement with Dazn

The National Markets and Competition Commission (CNMC) publishes a resolution urging Telefónica to modify certain aspects of your agreement with Dazn to adapt it to the commitments acquired after the concentration operation between Telefónica and DTS in April 2015.

This resolution is part of the surveillance work carried out by the CNMC to verify that Telefónica complies with the commitments offered for the approval of the takeover of DTS (the former Sogecable) by Telefónica by acquiring the 56% of DTS that the PRISA group owned.

The commitments (Telefónica/DTS) affected the pay television market and included the wholesale marketing of an annual offer of content consisting of “premium channels”, the replicability of the products with these channels and the non-discriminatory Internet access of its clients to pay television content from OTT (over the top) operators.

Annual Premium Channel Offer

Consequently, Telefónica must have a wholesale offer so that its competitors can access pay channels with premium content (new release movies, national and international sports competitions, etc. including Formula 1), and market them through their own pay television platforms. To calculate the payment of competitors for access to football channels and the engine of wholesale supply, Telefónica takes into account the so-called guaranteed minimum cost (CMG).

Motor channels, like football channels, are subject to the proportional distribution of the fixed costs for the payment of exclusive broadcasting rights between Telefónica and the operators that contract them, and of the production costs and other concepts (this is the CMG).

This proportional distribution is carried out based on predetermined criteria in the commitments that include the quota of pay television subscribers of each operator, as well as the contracting potential based on their networks.

Likewise, the commitments limit Telefónica's acquisition of exclusive (also de facto) broadcasting rights in Spain for channels published by third parties.

Agreement between Telefónica and Dazn

In the case of this resolution, the CNMC has analyzed whether Telefónica complies with specific aspects of the commitments: the wholesale offer of Telefónica's own premium channels, the guaranteed minimum cost, and the acquisition of broadcasting rights for channels published by third parties.

The agreement involves the sublicense by Telefónica to Dazn of the exclusive broadcasting rights (previously acquired by Telefónica exclusively) of the Formula 1 competitions for the 2021, 2022 and 2023 seasons. In addition, Telefónica and Dazn have agreed on the conditions under which Dazn will allow Telefónica non-exclusive access to Dazn content, including Formula 1 that Telefónica will offer on its own OTT platform. and establishes limitations on the acquisition of these rights by third parties.

The contract also establishes the way in which clients who contract Telefónica packages that access Dazn content will be counted (which will be counted as Dazn clients).

Contract changes

The CNMC considers that certain aspects of the contract may not be compatible with the commitments of concentration C/612/14. In particular, they could mean a reduction in the wholesale offer that Telefónica makes available to other operators and a restriction on the agreements that Dazn could reach with other operators to distribute their content.

Consequently, the CNMC has asked Telefónica to modify its contract so that Formula 1 content continues to be incorporated into its wholesale offer and ensures that Dazn accesses this content in a non-discriminatory manner.
Secondly, Dazn's pay TV customer count will need to be modified to meet commitments regarding the guaranteed minimum cost.

Finally, the CNMC considers that the clause that limits the possibility of Dazn reaching agreements with third-party operators to freely distribute its content must be deleted.