Supplementary written evidence from STV Group plc (FLM 60)
by Michael Grade, Executive Chairman, 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 responding.
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 £38m 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 for Scotland.
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
"we have about £33 million a year subsidies to Scottish, Ulster
and, to a far lesser extent, Channel;"
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.
"they get to approve the network budget"
This is not true
- through 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 £28m
(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.
"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.
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 Q.565, 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 £38m 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
"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.
"Look, what is driving this in Scotland - it 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 audience - it 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.
is just a shame that if they have got a cash problem - if they have - they 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 £2m 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.