Examination of Witnesses (Questions 1260
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
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
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 generallyand
this is a difference between say Rugby Union and Footballbecause
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.
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
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
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,
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:
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!