Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 1260 - 1279)

TUESDAY 13 DECEMBER 2005

Mr Mark McCafferty

  Q1260  Lord Maxton: The Unions, not you?

  Mr McCafferty: Correct, however the participants in the competition are the clubs and in our case in England six of the clubs would be competing in the Heineken Cup and there is also a secondary European competition beneath the Heineken Cup, so we have a say (and I personally am a board director of ERC) in how that process happens but we are one of six voices around the table.

  Q1261  Lord Maxton: You have had some problems in your relationships with the Rugby Union because it is the clubs that contract the players and through the television pay the wages of those whereas in some of the other countries it is the union that contracts the players; is that right?

  Mr McCafferty: That is correct.

  Q1262  Lord Maxton: There have been some problems, and this presumably involves the broadcasting rights as well, over players going to play in games for the Rugby Union which the clubs do not actually think is worth the while of going to play in; is that right?

  Mr McCafferty: It generally does not affect anything to do with broadcasting rights for international games as compared to broadcasting of club games.

  Q1263  Lord Maxton: It does not?

  Mr McCafferty: No, generally it does not. As regards international games that are played domestically in a season, there are three games played in the autumn by England, which is a schedule of games which has just been completed, and that has been in place for a number of years and the Premiership plays through those weekends and then when it comes round to the Six Nations where England obviously have five games and either two or three of those games will be at home, so we will typically play through the weekends when there is either not a game or where England are playing away from home.

  Q1264  Lord Maxton: I know this maybe is not entirely to do with the BBC but does not that affect a club like Leicester Tigers or Sale who have got, say, six, seven or eight internationals from different countries in their squads and then they have to play a game against another club that does not have anything like that? In other countries in Scotland and Wales, as far as I am aware, the professional clubs do not play on the weekend when the international team is playing.

  Mr McCafferty: Generally that is true, yes.

  Q1265  Lord Maxton: So is this because of your contract with Sky?

  Mr McCafferty: No, it is to do with the fact that there are only a certain number of weeks in the year and the internationals are accounting for a number of those weekends and we have our competitions to fulfil as well and generally—and this is a difference between say Rugby Union and Football—because of the nature of the game we would not want to be playing more than one game a week because of the physical nature of the game, so it can put pressure on the scheduling of games and that is why, as an organisation, we would prefer there to be a defined limit as there has generally been on the number of internationals taking place during a season rather than an expanding number because as soon as it expands it then puts pressure on our business directly and that is where sometimes it can lead to issues and problems.

  Chairman: I am going to go on to Lord Holme because we are straying a bit here. Lord Holme?

  Q1266  Lord Holme of Cheltenham: Could I just explore why you think BSkyB are willing to pay more money for a smaller audience than the BBC are for a larger audience? Let me put it this way, if I understand the numbers you have given us (and I simplify them to help myself) roughly speaking, you are receiving £15 million income for an average audience starting at 120,000 and rising towards the end of the season, let's call it an average audience, to 150,000, and BSkyB are paying £10 per season per viewer, if I have understood your numbers. That is quite a lot of money to pay unless of course you are using the passionate interest that a relatively small number of people have in Rugby as a form of loss leader to lock people in to subscribe to your channel. I am not suggesting there is anything unethical about this. I am just trying to understand the business model concerned. Do you think there is any question that the sort of sums BSkyB are doing and asking, "It is costing us £10 for each of these people, on the other hand we can see a revenue stream over four or five years for each of them of £1,000 and therefore it is worth investing £100 to get this passionately interested minority who can get the rugby they want nowhere else; is it worth paying that?" It is trying to understand the business motivation of Sky in this?

  Mr McCafferty: I am not sure I can comment on the business motivation of either the BBC or BSkyB.

  Q1267  Lord Holme of Cheltenham:—You must have a passionate interest in it because it affects how much money you get.

  Mr McCafferty:—How they generate their return on investment over the investment decisions they make when they are purchasing rights such as sport. Perhaps just to clarify though, when someone acquires the rights to the Premiership games and competitions they acquire all of those rights, so the number of games that they stage on any given weekend is essentially up to them. The fact that they stage one game for instance on a weekend and it generates a 120,000 viewing audience is a decision they make. They could televise more than that in terms of live coverage of games. Indeed, when they get to the end of the season—

  Lord Holme of Cheltenham: Just sticking to my calculation, which is £10 per season, it does not matter how many games there are.

  Q1268  Chairman: These are the in-home ones?

  Mr McCafferty: Correct.

  Chairman: We are not counting in under that, are we, the pubs and the clubs?

  Q1269  Lord Holme of Cheltenham: No, I am counting homes.

  Mr McCafferty: How do they justify that? Is that your question?

  Q1270  Lord Holme of Cheltenham: I am saying there are you, with two potential bidders; one will pay more for less viewers watching and the other will pay less for more viewers watching. You can quite rightly take the view that is up to them but I am interested as somebody trying to stoke up a good auction so you can maximise your income what you think the respective motivations are. I think we know what the BBC's is but what is the motivation of BSkyB and the issue I am pressing is whether in order to lock up people very committed to a sport they are prepared to pay over the odds as a form of loss leader in supermarket terms?

  Mr McCafferty: Our job as an organisation is to market the rights as effectively as we can in order to generate a return in order that we can distribute that return.

  Q1271  Lord Holme of Cheltenham: Would you agree that a good marketer is trying to assess the motivations of the purchaser?

  Mr McCafferty: Yes. I think from that point of view one has got to remember that they have the rights to all of those games each weekend and indeed as they go through the season they would televise more of those as they got to the crucial stages of the season. When we talk, as we have mentioned, about 120,000 to 130,000 we should be clear it does not include the broad audience that would watch that within pubs and clubs and rugby clubs, et cetera. From our point of view, one has also got to remember as a broadcaster we really want to commit to a continuous coverage of our product so what we know when we enter into that kind of relationship that somebody is covering the product and competition week in week out. It is a 22-week competition followed by a semi-final, a play-off game and then a final game, so we have got 24 weekends during the year when at least one game, if not more, is being covered and promoted and shown to the audience so that continuity is also a factor, I think, and I believe that the BBC may have more difficulty in committing to that kind of volume and level of coverage.

  Chairman: I want to bring in Lord Kalms.

  Q1272  Lord Kalms: Part of my question has already been asked. Is this £12 to £15 million paid evenly over five years?

  Mr McCafferty: There is a small step up but it is not a significant one. Essentially it is fairly evenly spread.

  Q1273  Lord Kalms: You talked about £14 million, you did not talk about the gross amount. Was that significant in itself?

  Mr McCafferty: Can I just clarify that is per annum over those years and there is a slight step up over the course of five years.

  Q1274  Lord Kalms: So it does include some formula?

  Mr McCafferty: I am sorry?

  Q1275  Lord Kalms: On some formula it does increase over the five years?

  Mr McCafferty: It is slightly back end loaded, it is not a complex formula, and many contracts are structured like that.

  Q1276  Lord Kalms: You mentioned £12 million, you did not mention £60 million. Is that significant in any way? The contract is a £60 million contract.

  Mr McCafferty: No, I do not think it is significant. It is just the way we live from hand to mouth sometimes in sport one year to the next.

  Chairman: Did you want to come back, Lord Maxton?

  Q1277  Lord Maxton: The big difference of course from your point of view is presumably that Sky last weekend showed seven games plus a round-up programme.

  Mr McCafferty: At the weekend just gone?

  Q1278  Lord Maxton: Yes.

  Mr McCafferty: That is a Heineken Cup weekend, remember, that is different from the Premiership.

  Q1279  Lord Maxton: You will not get as much on that, will you?

  Mr McCafferty: Correct, we would get a share within that but there tends to be an extensive coverage around the Heineken Cup because it is only a six-weekend tournament.

  Lord Maxton: As a subscriber, I would not have to pay but I would not subscribe to Sky Sports if it did not carry rugby.

  Chairman: We know that, Lord Maxton! Baroness Bonham-Carter?


 
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