Memorandum submitted by Mr Kelvin Mackenzie
My company The Wireless Group is a commercial
radio company based in the United Kingdom. It owns and operates
15 independent local stations across England, Scotland and Wales
plus the national UK-wide commercial speech based licence, Talk
Radio.
The BBC is in a unique position of being able
to affect a commercial business like ours while not being an (overtly)
commercial business itself. The BBC has recently started paying
a significant premium for radio sports rights—a market that
did not exist before my company started bidding to share or bid
against these rights. The reason—my company saw the audience
building and commercial opportunities that coverage of live sport
on the radio offered.
My company is being, in effect, financially
penalised for the BBC's losses in television sports rights. BBC
Executives argue in private that if an event is not on BBC television,
it must be on BBC radio. A senior BBC radio executive has said
to us "if we lose the TV right we make sure—no matter
what the cost—that we win it for radio".
— Competing against the taxpayer for
rights. The BBC is effectively a monopoly in speech radio—spending
£175 million+ on Radios 4 and 5 Live and an ability through
its television channels BBC1 and BBC2 to plug its sports rights.
I have had the value of this airtime independently costed—it
is worth in the region of £20 million per annum.
— Radio is not like television where
revenues are such that they can compete against the taxpayer—and
each other—for the rights. In radio, if the BBC wants it
they invariably get it. Sports rights are one of the ways—not
the only one—which can guarantee a business, likewise an
audience—and I need an audience to bring in revenues to
(a) stem my losses and (b) reward the advertiser for coming onto
my station.
— Surely it is not right that a state-funded
body can imperil the future of a commercial broadcaster? State
funding no longer supports the telecommunications industry. Or
steel. Or gas. What is it doing in radio production?
So, what do I propose? In my ideal world I would
like to see Radios 1, 2 and 5 Live privatised. Everything they
offer can be offered, without question, by the commercial sector.
But looking at this Cabinet, who talk a good game about business
but as far as I can see know nothing about the realities, what
can I realistically expect them to do about it?
Many of the people who know how to run a business,
Bland, Dyke, Rupert Gavin, all have business experience and are
using the Corporation's unearned revenues to attack businesses
like mine. So, working on the assumption that the Department for
Culture, Media and Sport would stage a mass suicide rather than
privatise the BBC, I propose that at the very minimum a spending
cap is introduced on Radios 1, 2 and 5 Live.
This cap, which would apply to the programming
and marketing spend would take in all forms of sports rights,
wages, marketing, etc. For Radio 5 Live, my competitor, I would
put that figure at around £15 million and in one fell swoop
I will save the taxpayer £45 million plus enhancing the prospect
of my company one day making money.
— I have no criticism of the output
of Radio 5 Live—it is exactly the same problem that the
Washington judge dealt with in the anti-trust case against Microsoft.
The software, Windows 95 etc was great but the company used its
own revenues to dominate the marketplace. It is the same with
my company—I need protection from the commercial damage
that a state-funded monopoly is doing to my business.
November 1999
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