Supplementary written evidence submitted
by STV Group plc
RE: EVIDENCE BY
ITV PLC GIVEN
8 DECEMBER 2009
Further to my letter of 11 December 2009, I
am pleased to have the opportunity to present further evidence
from STV Group plc to the Committee. We acknowledge and agree
that this further evidence will be made public.
STV's additional submission is made in light
of Michael Grade's evidence of 8 December 2009. His remarks about
STV were factually incorrect, misleading and damaging to STV.
For ease of reference we have identified in
the Appendix the relevant individual questions by number and reproduced
the specific comments from Mr Grade's evidence to which we are
Membership of the Channel 3 network entails
collaboration and collective activity in the interests of all
members, and their viewers. It is an ethos which has imbued the
federal system from its inception. In that regard, we consider
the most damaging comments of all amongst Mr Grade's evidence
are the repeated assertions that STV enjoys a "subsidy"
from ITV, and that we have "a cash problem", and have
"renege[d] on a contract". These comments are typical
of ITV's recent inappropriate and openly aggressive stance towards
STV and are simply wrong.
Further, the suggestion that ITV had been "trying
to settle this (dispute) with Scottish for well over a year"
before it launched legal proceedings for recovery of the gross
sum of £38 million is also misleading and false. ITV well
knew that there were amounts owing by both parties, some of which
were agreed and some which not. When the agreed amounts are netted
off it gives a much smaller figure than that which ITV publicised
when it issued the proceedings. Despite that knowledge ITV issued
its claim for the gross amount leaving STV to have to counterclaim
in respect of the amounts which were agreed as well as those that
were not. Netting off on ledgers is a recognised network process
and as in the past, considerable work was ongoing to do so (most
of it, this year, at the instigation of STV) right up until the
ITV claim was filed. You should also be clear that STV has an
absolute right to opt out of the network schedule within certain
parameters. ITV has alternatively recognised and denied this right,
but has not engaged substantively at all to try to find any workable
solution to how this opt-out process should best operate despite
STV's offers to do so.
I trust this submission is useful. The Channel
3 network remains the UK's pre-eminent commercial public broadcasting
service in which there is significant public interest. It is vital
that any debate around the licensees is fully and accurately informed,
and that an outgoing executive chairman of ITV plc should not
be afforded an unchallenged platform from which to deliver inaccurate
and misleading remarks to discredit the commercial broadcaster
I would be happy to expand on any areas as required,
in person or in writing and if you have any further questions,
please come back to me.
STV Group plc, additional evidence to the Culture,
Media and Sport Committee in response to comments made by Michael
Grade, ITV plc.
Q515. "we have about £33 million
a year subsidies to Scottish, Ulster and, to a far lesser extent,
STV vehemently disputes Michael Grade's claim
that there is any "subsidy" flowing from ITV plc to
the non consolidated licensees. The methodology ITV has employed
in arriving at this number is entirely flawed in that it takes
no account of the additional value ITV plc derives from network-related
activities funded by all licensees but where STV, UTV and Channel
receive no benefit.
Q565. "they get to approve the network
This is not truethrough its 92% majority
position in the network, ITV has complete control over the annual
network budget. STV has no power to influence this, no right of
approval and no say in what is commissioned. Moreover, even after
the network budget is set for a particular year, ITV plc manipulates
the amount without any reference to STV and the other non consolidated
licensees. In 2008, it retrospectively inflated the price paid
for Coronation Street and Emmerdale in order to meet the Ofcom
quota for out-of-London production targets. Although this increase
was not passed on to STV, UTV & Channel, we object to it being
carried forward into subsequent years. Also in 2008, as in previous
years, ITV Network wrote off £28 million (excluding FA cup/England
sports rights) of programmes without notice or consultation, the
effect being simply to raise the network programme budget at the
end of the year without due process.
Q569. "I do not think Ofcom could possibly
be regarded [...] as an honest broker in that situation"
STV continues to fail to understand why ITV
has refused the arbitration process offered by Ofcom; Michael
Grade's allegation that the regulator could not be regarded as
"an honest broker" is disingenuous, particularly since
the offer was rejected out of hand without any understanding or
investigation of how the process might actually work and who would
undertake the arbitration itself.
Q570. "we are the victims of this."
This is a remarkable assertion from Michael
Grade which is completely untrue. STV has exercised its right
to opt out of network programmes and be excluded from paying for
same through the terms of the Devolution Contract. That contract
is included within the Channel 3 networking arrangements which,
at Q565, Michael Grade suggests have operated "very, very
well". ITV has no right of veto in this regard, yet has chosen
to deny STV its rights to the point of now pursuing STV through
the courts for sums it disputes. Details of its litigation were
publicised by ITV prior to being served on STV and ITV admits
the actual sum it is disputing is far less than the £38 million
figure it has used as a headline claim. Separately, STV has been
forced to seek legal redress over ITV's abuse of our new media
rights, which have been included within deals done by ITV for
video-on-demand services without our consent and we may be forced
to bring further proceedings to address significant acts of prejudice
we experience within ITV network. Any suggestion that ITV is a
"victim" here is entirely wrong.
Q571. "We have actually been very, very
patient. We have been trying to settle this with Scottish for
well over a year and we have failed. We did not decide blithely
to sue them; we tried for a year to settle it and reach agreement
with them but we failed and so we have no option."
This is not true. ITV has made no attempt to
engage substantively with STV in that time around reaching any
form of agreement or common understanding about our right to opt
out of network programming under the Devolution contract, preferring
instead to pursue the court action which has now ensued.
Q571. "Look, what is driving this in
Scotlandit is not about Scottish production; if you look
at the schedule that they produced that replaces these programmes,
it has got nothing to do whatsoever with the Scottish broadcaster
for the Scottish audienceit is about saving cash."
This is factually incorrect. STV's programming
strategy is predicated entirely around building a relevant and
affordable schedule for Scotland. During 2009 we have produced
a significant amount of high quality content for inclusion in
our schedule, particularly during peak time. From The Hour,
a daily, live magazine, through factual series such as Scots
Who Fought Franco, Scotland Revealed and Made In Scotland
to extended news coverage of important events such as the release
of the Lockerbie bomber, Abdul Megrahi, STV has demonstrated a
tangible commitment to serving Scottish audiences. We have been
open and honest about shortcomings in our scheduling, particularly
around replacing drama with film on Sunday evenings. However,
we are in the early stages of a long term strategy and our schedule
for 2010 builds on our experience and contains hundreds of hours
of Scottish content, from sport to comedy and current affairs
and including drama in Taggart, which we have committed
to produce even without a commission from ITV.
Q574. "It is just a shame that if they
have got a cash problemif they havethey did not
sit down with us at the beginning, as you would do. If you have
an "onerous contract" you go and talk to the people.
We are partners in the business and we should have sat down"
STV believes these comments from Michael Grade
to be actionable had they been made outside the confines of Parliamentary
privilege. This serious allegation is mischief-making aimed only
at discrediting STV. The suggestion that we have "a cash
problem" and that we should "sit down.. and talk to
[ITV]" is completely inaccurate, highly patronising and damaging
to STV's reputation. In fact, STV now makes a fixed monthly payment
to ITV, and we have just received a £2 million rebate for
overpayments across the summer so our cashflow is such that we
have, in fact, been able to overpay ITV and have received a balancing
payment back, without interest.
The Committee should be in no doubt that at
the heart of this dispute lies a disagreement over the terms of
STV's opt out rights and not, as suggested by Michael Grade, an
unwillingness or inability on STV's part to pay legitimate sums
due. STV has been part of the federal Channel 3 network for over
50 years, we pay our share in return for access to network content.
We have called for the networking arrangements to be streamlined
and modernised in light of a single company now exercising effective
control of the network (through its 92% shareholding), a very
different situation from when 15 separate licensees co-existed.
However, we will not permit our clear and unequivocal right of
opt out to be vetoed in the way ITV is attempting to do so.