Memorandum by the BBC
SUMMARY
— The BBC has a distinguished tradition
of sports broadcasting, dating back to its coverage of the FA
Cup Final in 1927. Over time, certain sporting events have become
synonymous with the BBC: Wimbledon, the Grand National and the
Olympics.
— The advent of multichannel television
has irreversibly changed the sports media market. As a result,
whilst we can never again be the home of all sports, we can be
the national sports broadcaster for the UK by broadcasting matches
of great importance, showcasing the world's biggest events and
creating new heroes.
— Over the coming years the BBC will
be bringing UK audiences coverage from major events such as the
Olympics, football's World Cup and the Commonwealth Games, as
well as coverage of annual highlights such as the Six Nations
and the London Marathon.
— The BBC currently offers audiences
around 1,500 hours of televised sport each year, 4,000 hours of
sport on national radio (plus a further 30,000 hours of coverage
on local radio) and over a million pages of content on bbc.co.uk/sport.
This includes both live and highlights coverage as well as sports
news services. Around 40 different sports are covered each year.
— The BBC provides public value for
the licence fee payer with a balanced sports portfolio, in line
with its commitment under the Agreement[1]
". . . to provide wide-ranging coverage of sporting and leisure
interests . . .". Broadly, BBC Sport aims to provide a mix
of programming that:
— meets the need of both majority and minority
interest groups;
— reaches a wide variety of audiences and
demographics;
— includes "unite the nations"
events;
— ensures a variety of high profile and
more niche products; and
— contains a mixture of sports content
(ie highlights and live programmes).
— In order to provide a balanced portfolio
of sports output, the BBC must assess the value of particular
sports to licence fee payers taking into account the public service
value to the BBC's portfolio.
— Working with a finite pool of money
for sports rights acquisitions, the BBC has no incentive to over-bid.
The BBC follows a rigorous process for assessing the value of
events to the BBC's portfolio and the price acceptable for the
rights.
THE BBC'S
ROLE IN
SPORTS BROADCASTING
The BBC's role in sports broadcasting is unique
for a number of reasons:
— We broadcast events that bring the
nation together: the World Cup, the Olympics.
— We are free-to-air, so available
to everyone in the UK.
— There are no interruptions from commercials.
— Our live coverage is supplemented
by rigorous but fair analysis and reporting.
— BBC Sport is on television, on radio
and online.
— We operate nationally, locally and
regionally.
— We have a commitment to bringing
minority sports to terrestrial audiences.
— We work effectively with sport bodies
to deliver grassroots development.
— We offer ground-breaking interactivity,
on-demand services and innovation, which have helped drive digital
take-up.
THE BBC'S
SPORT OUTPUT
In order to fulfill this role the BBC currently
offers audiences around 1,500 hours of televised sport each year,
4,000 hours of sport on national radio (plus a further 30,000
hours of coverage on local radio) and over a million pages of
content on bbc.co.uk/sport.
A significant amount of television airtime is
devoted to coverage of the major sports and events that audiences
really value. In 2005 these include the FA Cup, Premiership football
highlights, the Grand National, World Snooker Championships, golf's
Open Championships, the Six Nations, the World Athletics Championships
and Wimbledon amongst others. As well as coverage of standalone
live events, BBC television also broadcasts Grandstand. This provides
live and highlights coverage of both major and minor sports and
in particular provides context around Olympic sports. In addition,
a comprehensive sports news service is provided on both BBC One
and BBC News 24 as well as on Ceefax, the BBC's television text
service. The BBC also produces and broadcasts documentaries and
entertainment programmes featuring sports issues or personalities.
On radio, the BBC offers live coverage, primarily
broadcast on Radio Five Live and Five Live Sports Extra, as well
as sports news bulletins on Radios 1, 2 and 4. As with television,
the BBC also offers listeners documentaries and entertainment
programmes on sport.
The BBC Sport website offers separate detailed
homepages for 15 individual sports, plus special sections for
disability sport and the Sport Academy (which helps develop participation
and understanding). Other sports are covered on merit and results
from minority sports are included on a daily basis. Coverage includes
news and scores updates, results and fixture lists, video highlights
as well as live text commentary.
Across all three platforms the BBC offers audiences
a very diverse range of sports coverage. In covering these sports
the BBC offers commentary and analysis as a minimum. In many cases
coverage also features value-added services such as interactivity
or human interest stories. During 2004 the BBC covered some 41
sports.
THE BBC'S
APPROACH TO
SPORTS RIGHTS
The BBC's primary duty is to its licence fee
payers and therefore seeks to ensure that they have access to
the most significant and diverse range of sports content viable
within the constraints of funding and scheduling. BBC Sport (a
Division of the BBC) has responsibility for the valuation and
negotiation with rights holders of all bids for national sports
rights.[2]
There are two key advantages in BBC Sport having responsibility
for the allocation of the BBC's national sports rights budget.
Firstly, BBC Sport can take a view across the whole of the BBC's
portfolio of services. Secondly, BBC Sport has a finite sports
rights budget: there is therefore no incentive for BBC Sport to
over-pay for any one particular right given the inevitable knock-on
effect on resources available for other rights.
Listed events
The BBC supports the system by which some events
are currently reserved for analogue television. This means that
the biggest sporting moments can be seen free-to-air by very large
audiences. Although we always pay fair and reasonable prices for
our rights, it also helps deliver value-for-money for the licence
payer by avoiding the premium on rights fees generated by the
subscription model of pay television. In the recent example of
domestic cricket coverage the lack of listing meant that costs
were driven up by pay TV pressure, where the incentive is to get
exclusivity to attract subscribers.
There have been suggestions that the listing
of events will lose its relevance when the UK becomes fully digital.
We do not believe this is the case because there will still be
a fundamental divide between free-to-air broadcasters and pay
TV operators. BBC ONE will be universally accessible in the digital
era as it is now. By contrast Sky Sports and similar channels
will still be funded to a significant degree by subscriptions,
which currently cost, in Sky's case, over £400 per annum.
This has the effect of deterring casual viewers from tuning in
to major events. It also, of course, discriminates against those
who can't afford an array of subscription services.
Partnerships
In making rights acquisitions the BBC seeks
to operate fairly within the modern broadcasting environment.
Where appropriate, the BBC tries to ensure that its coverage is
complementary to that offered by other broadcasters. For example,
football audiences are well served because while Sky has live
Premier League we have the highlights in Match of the Day (which
reaches up to half the population each season). Similarly the
BBC and Sky share the FA Cup and whilst the BBC cover live England
home internationals, Sky broadcast away games. In World Cup and
European Championship tournaments games are shared with ITV. Looking
across platforms in cricket, TV audiences have been well served
by Sky and Channel 4 this summer whilst the BBC has offered comprehensive
radio and online programming.
Valuation of Sports Rights
Valuing sports rights is not an exact science
for any market participant. BBC Sport takes into account a number
of factors, which we have set out below.
Portfolio fit
A key objective for BBC Sport is to ensure that
both overall and in relation to each station/channel, the BBC
provides public value for the licence fee payer with a balanced
sports portfolio, in line with its commitment under the Agreement[3]
". . . to provide wide-ranging coverage of sporting and leisure
interests . . .". Broadly, BBC Sport aims to provide a mix
of programming that:
— meets the need of both majority and
minority interest groups;
— reaches a wide variety of audiences
and demographics;
— includes "unite the nations"
events;
— ensures a variety of high profile
and more niche products; and
— contains a mixture of sports content
(ie highlights and live programmes).
The attractiveness of a particular sports right
may differ depending on the extent to which it complements BBC
Sport's existing/planned portfolio at any given point in time.
Cost-to-user
BBC Sport will always undertake a cost-to-user
analysis, which involves calculating a cost per hour and cost
per user (viewer or listener) hour, and comparing such cost with
historic data for previous or similar events for that channel/station.
BBC Sport also compares the cost per user hour with alternative
BBC services (ie non-sport programming).[4]
Commercial value
Assessments on the value of sports rights in
the commercial market allows us to benchmark our costs against
others. The value of a sports right can be estimated in two main
ways:
— A "top-down" market analysis
approach benchmarking the value of a sports right against the
prices paid for similar rights in the past. On occasions, BBC
Sport will commission an independent third party to conduct an
external benchmarking exercise.
— A "bottom-up" revenue/cost
modelling approach to benchmark the value to the BBC and avoid
over-paying.
Adding extra value
Other factors that may be taken into account
when BBC Sport values rights include long term strategic, archive
and/or brand value and any scheduling constraints. Such assessments
have led to the BBC letting go of events which have become too
expensive. In some cases, such as coverage of cricket on television,
the BBC would currently be unable to deliver good value for money
for audiences due to scheduling issues and the inability to exploit
rights fully. This, as well as the difficulty in competing financially
with a pay-TV business model, limited the capability to bid. By
the same token, scope for extended use of rights to an event may
make them particularly good value. For example, under the recent
negotiation of FA Cup television rights the BBC was able to offer
audiences 19 live matches rather than the usual 12. However, there
are also events where the BBC has been disadvantaged because it
was unable to fulfil onerous sponsorship obligations imposed by
the event organiser.
RIGHTS ACQUISITION
PROCESS
All the factors set out above will be considered
by BBC Sport before establishing its bid price. These factors
will be weighed against a risk evaluation (for example by reference
to the specific market or production resources available) and
an options analysis (ie consider all reasonable options and alternatives,
including "do nothing").
Once BBC Sport has come to a figure that it
believes is a fair market price it must first obtain the appropriate
approvals, as set out in the BBC Sport Investment Guidelines and,
more generally, the BBC Investment Guidelines. A brief overview
of this process can be found in Annex 1.
In addition to the process stated above, BBC
Sport takes its Fair Trading obligations very seriously and has
a robust and effective Fair Trading infrastructure in place to
ensure compliance. Every bid to acquire a particular sports right
goes through BBC Sport's Fair Trading approvals process. BBC Sport's
Fair Trading Representatives agree all rights acquisitions. BBC
Sport also regularly seeks advice from the BBC's Regulatory Legal
competition lawyers and/or central Fair Trading teams. Every quarter
BBC Sport reports to, and meets up with, the central Fair Trading
team to discuss issues arising over that period.
The BBC's overall system of Fair Trading controls
and processes are subject to an annual review by independent auditors
who are tasked with reporting on the BBC's compliance with its
Fair Trading Commitment. Furthermore, the BBC's Fair Trading systems
are subject to a bi-annual review by ISO assessors to review ongoing
accreditation with the ISO 9001:2000 standard.
CONCLUSION
In recent years the BBC has reassessed the importance
and value of sport to its audiences and reprioritised investment
to reflect this. A strong and diverse portfolio across platforms
means that over the coming years the BBC will be bringing UK audiences
coverage from major events such as the Olympics, football's World
Cup and the Commonwealth Games, as well as coverage of annual
highlights such as the Six Nations and the London Marathon.
November 2005
1 Agreement between the Secretary of State and the
BBC dated 1996 as amended. Back
2
Please note that BBC Nations and Regions also acquire their own
rights, although the process is broadly similar. Back
3
Agreement between the Secretary of State and the BBC dated 1996
as amended. Back
4
The BBC Annual Report 2003/04 gives the CPVH by genres, p145. Back
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