Select Committee on BBC Charter Review Second Report



106.  The BBC has a rich and distinguished heritage of broadcasting sport, dating back to the first televised F.A. Cup Final in 1927. Since then its name has become synonymous with iconic programmes such as Match of the Day and prestigious events such as the Olympic Games and Wimbledon.

107.  During the last 15 years however, greater competition between broadcasters has resulted in a significant increase in the cost of acquiring sports broadcasting rights. Many sports clubs and governing bodies are now multi-million pound businesses with substantial media, commercial and property interests. The growth in sports broadcasting costs means the BBC is encountering strong competition from terrestrial, satellite and cable channels for the acquisition of sports broadcasting rights.

The role of sport in the BBC's public purposes

108.  A recent Ofcom survey of the public's attitude to Public Service Broadcasting shows the significance of sport to the success of the BBC. The survey found that after news, sport was the second most valued type of programming.[37] The BBC's Director of Sports, Roger Mosey, agreed with the survey's findings, stating "sport is a vital part of the BBC's overall portfolio" (Q 210). The BBC's Agreement with the Secretary of State requires the BBC to provide wide-ranging coverage of "sports and other leisure interests".[38] In order to meet its obligations to both licence fee payers and the government, the BBC provided around 1700 hours of televised sport in 2004/05 (equivalent to ten per cent of BBC One and Two's total output)[39] and over 4000 hours of sport on national radio.[40]

109.  The Green Paper suggests that in the future, the BBC should have two responsibilities for sports broadcasting. Firstly, a role in "bringing audiences together, across the UK, for shared experiences, for example by broadcasting sporting events of particular national importance".[41] And second, a role to help "promote interest and participation in… smaller, minority-interest sports that are less well covered by commercial networks".[42]

Bringing audiences together

110.  With reference to the first responsibility, the BBC has stated that in an era of audience fragmentation, broadcasting major sports events remains a key way of "building public value". Roger Mosey asserted that "Sport can still bring the biggest audiences to the BBC" and cited the 25 million audience for England's Quarter-Final match in Euro 2004 as proof of its power to attract huge audiences (Q 210). We received evidence showing that the BBC (and other free-to-air broadcasters) are the only broadcasters able to unite such large audiences around one event. For example, Paul Vaughan, the Commercial Director of the Rugby Football Union, compared an average audience of 5.3 million for England games on the BBC with around one million on Sky Sports. He stated that the BBC's ability to reach large audiences was why the Rugby Football Union sold its rights to a mixed package of broadcasters including the BBC (Q 331). The disparity in audience figures was confirmed by Mark McCafferty, Chief Executive of Premier Rugby, who revealed that the average audience for a league match broadcast on Sky Sports was only 130,000, compared to cup matches on the BBC that attract between 1.3 and 1.9 million people (QQ 1252, 1254).

111.  ITV was convinced that a "significant proportion" of the population will never subscribe to pay television, with even more lacking access to "premium rate sports channels". It believes therefore that free to air broadcasters, including the BBC, should play an important role in making sports events available "free and to all viewers" (p 261). Sue Campbell, the Chair of UK Sport (which has responsibility for government and national lottery investment in sport), stated in relation to the London 2012 Olympics that "The BBC's ability to reach people freely in large numbers has to be something that we all need to exploit to maximise this fantastic opportunity" (Q 284).

112.  The BBC has both an obligation and an incentive to remain a significant national public service broadcaster of a wide range of sports. The obligation derives from its method of funding by the licence fee but the incentive comes from the importance of sport to the licence fee payer. Sport is likely to remain an important public service genre to the BBC after digital switchover and may provide a vital means of slowing audience fragmentation in multi-channel homes. In addition, it is likely that the BBC will provide one of the few truly national showcases for those sports which struggle to compete for the public's attention. We therefore support the Green Paper's vision that the BBC must continue to play a prominent role in bringing audiences together for shared experiences of nationally important sporting events.

Encouraging participation in grassroots sports

113.  With reference to the Green Paper's assertion that the BBC can help to promote interest and participation in smaller, minority-interest sports, Dominic Coles, BBC Director of Sports Rights & Finance, stated "We do feel an obligation to showcase not just the biggest, grandest events but also the more minority public service sports" (Q 245). In addition to its coverage of major sports events such as the FIFA World Cup, Six Nations Rugby and Wimbledon, the BBC emphasised high profile coverage of minority sports on its flagship programme Grandstand (Q 245). Sue Campbell praised the BBC's dedication to minority sports and recalled that "Between the Olympics and Paralympics, virtually every other broadcaster exited but the BBC was there and did an outstanding job on the Paralympics" (Q 295). In terms of long term investment she added that for the Paralympic World Cup "if the BBC had not supported that, we would not have got the sponsor or the event and it would not have been the enormous success it has been" (Q 298).

114.  An important benefit in the BBC broadcasting a wide range of sports, including minority sports, is that it encourages participation. BBC coverage of events such as the London Marathon persuades people to get involved in sporting activity. Premier Rugby were supportive of the BBC maximising this role. Mark McCafferty stated that "…the BBC is well-placed to work with us to explore not only covering the professional game but covering work that we do in the community with local clubs and schools" (Q 1323). The BBC believes it fulfils its promotion role well and points to partnerships with a variety of sports bodies to develop grassroots sport, as additional evidence of its long-term commitment to fostering participation (Q 239).

115.  However, as Sue Campbell noted, outside broadcasts for sport are extremely expensive and that "As a business they [the BBC] have to balance that cost against audience numbers…" (Q 304). It is likely that because of the increasing costs of acquiring broadcast rights for sports and greater competition for audiences post digital switchover, ITV, Channel 4 and five will find it increasingly difficult to invest in minority sports. As the publicly funded national public service broadcaster, the BBC has a responsibility to provide a broad range of coverage across a variety of sports. Of significant importance will be provision of minority sports, outside of football, rugby, cricket and tennis that are not economically viable for commercial PSBs. However, given the restriction of hours available for sport across the BBC's multi-genre channels, it will not be able to rival the breadth and depth of BSkyB's niche minority sports coverage.

116.  We recommend that the BBC should promote participation in sport through local and accessible sports. We also recommend that within the limits of its broadcasting schedule, the BBC should provide a national platform for coverage of minority sports. The BBC should be congratulated on the work it has done in this area so far and should continue to work in partnership with sports' governing bodies to develop its role in the field of grassroots local and youth sport.

Packaging of sports rights

117.  The way sports rights are sold raises important questions of consumer interest and concerns both UK and European regulators. For example, the European Commission investigated the football Premier League's sale of TV rights, while Ofcom considered the Football Association's sale of radio rights. In December 2002, the European Commission issued a "Statement of Objections" which summarised its investigation of the Premier League. The European Commission judged that the collective and exclusive sale of large packages of media rights created barriers to entry and restricted the output of the Premier League. This was because the combination of collective selling across football clubs and the exclusivity of the deal led to monopoly ownership and hampered competition between media operators. In November 2005, the European Commission and the Premier League reached a preliminary agreement on reforms to the sale of live television rights. In principle, the agreement provides that the Premier League must divide its rights into six equally valuable packages of 23 games and that any single broadcaster can purchase no more than five of those packages.

118.  Philip Lowe, the Director-General for Competition at the European Commission, explained that the Commission's rationale for pursuing reform was that in England, 73 per cent of all live top-flight football was owned by a single broadcaster i.e. BSkyB (Q 1656). Lord Currie of Marylebone agreed that changes were required and questioned the "appropriateness" of one broadcaster having a monopoly of the live rights to Premiership football that are "not necessarily changing hands" (Q 1524).

119.  Lord Currie was satisfied with the preliminary agreement between the European Commission and the Premier League, stating "The fact that there will be more than one acquirer is a significant step forward" (Q 1521). However, ITV and Channel 4 both told us they were disappointed with the outcome and do not consider the agreement provides them with a genuine opportunity to acquire live Premiership football. Andy Duncan stated that "If you are only able to get 23 games, it is hard to do much with that in terms of really promoting it or driving a business" (Q 1164). Charles Allen thought it did nothing to introduce substantive competition to the marketplace and declared it a missed opportunity (Q 1211). Richard Scudamore, Chief Executive, FA Premier League, disagreed and stated "Every time we have tendered our rights free-to-air broadcasters have had a chance" (Q 1368). He concluded, "it is certainly not a foregone conclusion that we will end up in a five/one environment" (Q 1408).

120.  While the most high profile case of the Premier League has been considered by the European Commission the issue of ensuring competition for sports rights in one that concerns the UK authorities as well. Phillip Lowe told us that "I believe that if the case arose today under the new framework for European competition law it would have been dealt with by the OFT and other bodies in the UK" (Q 1654). Indeed, Ofcom and not the European Commission considered recent complaints by the Wireless Group (owners of the commercial radio station TalkSport) about the exclusive sale of FA Cup national radio broadcast rights to the BBC.

121.  We believe the approach of breaking up sports rights into packages is the right one to take. We are clear it is in the benefit of the consumer if there is more than one significant provider of sports coverage. However, with regard to the football Premier League's live television rights we are concerned that the number of packages; the quantity of games contained within them; and the ability of one broadcaster to purchase five out of six of the packages, will not create a competitive market. Our primary interest is in the creation of a market that provides fair and genuine choice for the consumer. It is in the public interest to ensure there is competition for sports rights and that free-to-air broadcasters, including the BBC, have a real chance to acquire a significant share of major sports rights packages.

Listed events

122.  A crucial dimension of what the Green Paper calls "sporting events of particular national importance"[43] are listed events. The Department for Culture, Media and Sport determines which events are listed. Those chosen must have a "national resonance", unite the country and be of such significance that they appeal to the general public and not just dedicated fans of the sport. The Government includes events that are likely to attract large audiences (such as national or international sport events) and those involving the national team or national representatives.[44] Listed events are divided into two categories: Group A listed events (such as the Olympics, F.A. Cup Final and Wimbledon Finals) which cannot be acquired exclusively by subscription broadcasters unless the live rights have been offered first to the BBC, ITV and Channel 4. And Group B listed events (such as Test match cricket, the Ryder Cup and the Six Nations Rugby) which may be acquired by subscription broadcasters as long as certain conditions are met e.g. highlights must be shown on free-to-air channels. It is important to note however that listing an event does not guarantee its live coverage on free-to-air television because broadcasters are not obliged to bid for the listed events.

123.  We received considerable evidence supporting the listed events system, but others were concerned about its impact on the market. Channel 4 believed that "the basic principle of having some listed events is a good thing" (Q 1173). But BSkyB disagreed, commenting that "unless there are overwhelming public interest reasons, both sport and the public are best served by the holders of sports rights having unrestricted freedom to market their rights as they think best" (Q 1029). BSkyB is convinced that the BBC should not be obliged to bid for listed events, which it states would be a substantial "distortion of the market" (p 232).

124.  The Rugby Football Union stated that "if you list and protect events, the broadcaster has to be given the right funds to be able to buy them at a relatively economic price. Otherwise, it just cuts away the lifeblood, in terms of investment that we need to make" (Q 361). And while the Welsh Rugby Union would not oppose the Six Nations being on the most protected, Group-A list, it agreed that broadcasters must "pay the market rate" (Q 361). The Rugby Football Union and Scottish Rugby stated that they wanted to see fewer Group-A listed events to improve their bargaining power with broadcasters (QQ 403, 404 and 405).

125.  The BBC is a strong supporter of the listed events system and concedes that without its protection "we would struggle" (Q 262). Dominic Coles gave the example of the Premier League as an area where the BBC cannot compete because "the amount that Sky pay on a per match basis… is way beyond the audience generating capability for a terrestrial broadcaster" (Q 262). The listed events system therefore has a significant impact on the BBC's ability to fulfil its public purpose of bringing audiences together for sporting events of national importance. It is worthwhile to note that of the ten Group A listed events, the BBC currently holds rights to nine and that in 2004/05 its top ten audiences for sport were all audiences for listed events. We believe that the listed events system is in the public interest as it ensures that free to air broadcasters, including the BBC, are able to ensure that all licence fee payers have access to nationally important sporting events.

Regulation of the listed events system

126.  The Broadcasting Act 1996 requires broadcasters to obtain Ofcom's consent before broadcasting exclusive live television coverage of listed sports events. Ofcom has a duty to ensure due process has been observed and has powers to fine non-BBC broadcasters if they provide false information or withhold material information related to the acquisition of listed sports events. However, should there ever be an offence by the BBC, Ofcom could only report the matter to the Secretary of State for Culture, Media and Sport. In our first report, we stated that to secure clearly independent regulation and clarity for complainants, Ofcom should assume the same regulatory responsibilities for the BBC as it has in respect of other terrestrial public service broadcasters.[45] Accordingly we recommend that the BBC be subject to the same regulatory framework as all UK broadcasters when acquiring listed events.

The broadcasting of cricket

127.  Cricket was moved from the Group A to the Group B of listed events in 1998. This move meant that the England and Wales Cricket Board (ECB) was free to negotiate a deal for its rights with any broadcaster providing a highlights package was made available to free-to-air broadcasters.

128.  From 1998 Channel 4 had a successful and highly regarded seven year partnership with BSkyB and the ECB. However, this contract came to an end in late 2005. Therefore in 2004 the ECB issued an invitation to tender for its broadcasting rights from 2006-2009. It split its rights into 27 packages to cover the four cricket seasons. One of these packages of rights was for live coverage of the seven Test Matches per season involving England. The ECB told us that these packages were designed to "create the most competitive market that we could, to create the widest range of opportunities for people to bid that we could" (Q 1551).

129.  The ECB's invitation to tender attracted a bid from Channel 4 of £54 million for the rights to the main home Test series over the four seasons (this was less than the £59 million Channel 4 had bid towards the three years of rights it and BSkyB had shared from 2003 to 2005). BSkyB submitted a bid for the rights to cover all the matches over the four seasons including those matches that no other broadcaster was interested in. As a result the ECB sold all its rights from 2006 to 2009 on a exclusive basis to BSkyB. This means there will be no live cricket available on any free-to-air channel for the next four years. The ECB sold the highlights package to Channel five which was the only free-to-air broadcaster to bid for highlights.

130.  Channel 4 were not happy with this result. Andy Duncan told us that he was "genuinely surprised and disappointed" by the ECB's "bizarre decision" to sell its rights exclusively to BSkyB. He believed that with further negotiation it would have been possible to achieve a balance between "sufficient money and a balance of exposure across both free-to-air broadcasters like ourselves and Sky…" (QQ 1142, 1143).

131.  The ECB's exclusive deal with BSkyB was approved by Ofcom in February 2005.[46] During its consultation on the deal Ofcom received no complaints from other broadcasters. We also understand that throughout the process of structuring its packages and selling its rights the ECB sought legal advice from the European Commission (QQ 1558, 1559 1560). Therefore it seems unlikely that the exclusive deal between the ECB and BSkyB can be questioned on competition grounds.

132.  The BBC did not bid for any of the ECB's packages. Dominic Coles told us that this was partly because the broadcasting of cricket presents real scheduling problems (Q 241). However, the BBC also failed to bid for the highlights package even though this would not have posed the same scheduling problems. Despite the BBC's lack of action Roger Mosey told us that he was concerned about the future of cricket on free-to-air television. He thought some cricket should have remained in the Group A of listed events to ensure free-to-air coverage (Q 259).

133.  The BBC's approach to bidding for Test cricket was criticised in a recent report by the House of Commons Culture, Media and Sport Select Committee. This stated that "we are particularly disappointed by the BBC...its funding by licence fee…taken together with its public service broadcasting responsibilities, can only lead us to conclude that it should have made a bid".[47]

134.  We are also concerned by the BBC's approach to bidding for live Test cricket. As the publicly funded national public service broadcaster the BBC has a responsibility to broadcast sporting events of national significance—yet in the case of Test cricket it did not even bid for any of the rights. The lack of any live Test cricket on free to air television might reduce youth interest and involvement in the sport and this is contrary to the BBC's commitments to encourage participation in sports. Had the ECB received more bids for its rights it could have refused to agree an exclusive deal with any one broadcaster. Because it received so few bids it was given very little room for manoeuvre. The BBC is partly responsible for this.

135.  Nevertheless we welcome the BBC's announcement that it will broadcast highlights of the 2007 ICC Cricket World Cup and we hope this signifies the BBC's renewed interest in the game. We strongly encourage the BBC to make a genuinely competitive bid for live TV rights of home Test cricket when negotiations begin with the ECB in 2009.

136.  One way of ensuring some live cricket remains on free-to-air television would be to return it to the Group A of listed events. The House of Commons Committee believed returning home Test match cricket to this group would potentially damage the sporting and financial success of cricket.[48] We agree. David Collier, the Chief Executive of the ECB, told us that the revenues of the ECB had increased substantially since the transfer from Group A to Group B listed events. This has benefits for the grassroots of the sport.

137.  We strongly believe that some live home Test cricket should be available on free-to-air television. We note that instead of recommending a return to Group A the House of Commons Committee recommended that "formal binding undertakings" to secure some free-to-air coverage of home Test cricket should be agreed between the ECB and the Department of Culture, Media and Sport.[49] We support the House of Commons recommendation and believe this is the most hopeful way forward.

A BBC sports channel?

138.  Roger Mosey testified to the considerable difficulties of scheduling sport on the BBC, citing "the constraints of where we operate within the two linear channels… clearly they are multi-genre channels and we have to compete for the air space against current affairs, religion, drama and comedy" (Q 245). The recent expansion of the BBC's digital channels such as BBC Three and BBC Four, as well as the growing success of BBC Online has provided greater broadcasting capacity and diversity than ever before. The BBC believes this gives it more flexibility to deliver choice for viewers and listeners. Roger Mosey predicted that "using digital technology to expand when you need it and then to contract… when you do not… may be the way we should be going in the future" (Q 263).

139.  Many sports bodies expressed concern about the BBC's difficulty in scheduling substantial levels of sports coverage. For example the Rugby Football Union stated that the BBC's "limited channel capacity" and its resultant effect on the scheduling of matches and kick off times "has become an issue".[50] The ECB referred in its evidence to the "very specific challenges that cricket poses to terrestrial broadcasters in terms of the longevity of some of its formats and the associated scheduling issues it carries with it" (p 322). The ECB therefore proposed establishing a dedicated BBC sports channel in addition to the BBC's current portfolio of TV channels to alleviate scheduling problems. This was supported by David Moffett, Chief Executive, Welsh Rugby Union, who thought "it would be ideal" but did not know whether the BBC could afford such a venture (Q 349).

140.  We note the continued popularity and success of BBC Radio Five Live and believe it is a good example of how the BBC can expand its sports coverage. However, aside from the obvious issue of cost, a number of additional problems present themselves when considering a BBC television sports channel. First and foremost, the BBC has stated that it does not intend to launch any further television channels and even if it were to do so, the new channel would be subject to a stringent public value test and market impact assessment by Ofcom. We recommend that while editorial decisions are an internal matter for the BBC, it should seek to maximise the full potential of its sports rights portfolio. One possible option would be to utilise its existing digital channels more imaginatively and flexibly in the broadcasting of sport.

37   Ofcom review of public service television broadcasting, Phase 1 - Is television special?, para. 119, p. 58. Back

38   Agreement Dated the 25th Day of January 1996 Between Her Majesty's Secretary of State for National Heritage and the British Broadcasting Corporation, para. 3.2, p. 6. Back

39   Ibid, 2004/2005, Table 7, p. 140. Back

40   BBC Annual Report and Accounts, 2004/2005, Table 11, p. 143. Back

41   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, p. 40. Back

42   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, p. 38. Back

43   Department for Culture, Media and Sport, Review of the BBC's Royal Charter: A strong BBC, independent of government, March 2005, p. 40. Back

44   The Advisory Group on Listed Events Report and Recommendations , March 1998 p.3. Back

45   First Report of Session 2005-06, para. 106. Back

46 Back

47   House of Commons Culture, Media and Sport Committee, First Report of Session 2005-06, para 21 Back

48   House of Commons Culture, Media and Sport Committee, First Report of Session 2005-06, para 60 Back

49   House of Commons Culture, Media and Sport Committee, First Report of Session 2005-06, para 38 Back

50   RFU Strategic Plans 2005/06-2012/13, Commercial marketing and business, para 320. Back

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