Select Committee on BBC Charter Review Minutes of Evidence


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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