Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 1360 - 1379)

TUESDAY 13 DECEMBER 2005

Mr Richard Scudamore

  Q1360  Lord Peston: Yes.

  Mr Scudamore: I have got to be very careful what I say about that because clearly we have only reached a provisional political agreement with the Commissioner herself and the Head of DG Competition and it is yet to go through the Advisory Committee and it is yet to be signed off by the College of Commissioners, but certainly we have been fighting the case, as you know, for four years in terms of our case against the European Commission, and it comes philosophically from a very different view of what our competition is. It ostensibly starts from this idea that we are some form of cartel. That is their view; clearly it is not ours. In our view, when team A plays team B it is only in the context of the competition, so whilst Arsenal can play West Ham United on a cold Tuesday night as a friendly some time in June the media rights value are worth nothing as a friendly but in the context of the Premier League competition, with three points or otherwise being extremely important, we believe that the value of those rights is held at least jointly by the competition if not jointly by the clubs in the competition, and therefore we start from a different place in that we do not see collective selling as being a restrictive activity. The analogy we use is that you would not take the windscreen wiper manufacturer and the car door manufacturer and say because they come together to produce a car that is a cartel activity. You need both components before you get the finished product which is in the context of the competition and therefore that is the thrust of it. If you start from those two different positions, you can see why it is quite hard to reach agreement in the middle.

  Q1361  Lord Peston: I have always approached it from the view that you have just put forward, that the product is the Premier League, the product is not the individual game, and that makes good sense to me. That means however it is not a cartel; it does not mean it is not a monopoly. An economist would describe the Premier League as a natural monopoly.

  Mr Scudamore: How can it be a monopoly?

  Q1362  Lord Peston: Because you cannot have two premier leagues, one of them is premier and that is by definition.

  Mr Scudamore: I presume this inquiry is interested in its broadcasting implication. Our arguments in our submission are that there is an awful lot more content that is of interest to the broadcasters, far more interest than our Premier League football.

  Q1363  Lord Peston: Nobody is arguing with you. It is just trying to get the nature of the product in order to understand the position of the European Commission. Did you say that because of what is going on you are not happy to comment on the outcome?

  Mr Scudamore: I will take each question as it comes.

  Q1364  Lord Peston: My question, which you sidetracked me away from, was whether you were happy with the outcome?

  Mr Scudamore: I have to say I do not know if it is yet an outcome.

  Q1365  Lord Peston: So you are not happy to answer the question.

  Mr Scudamore: If the agreement we have reached with the Commissioner and with the Director-General sees its way through the formal consultation processes and is signed off we (by definition the Premier League) are in the scheme of things satisfied with that agreement. As with all compromises both sides sometimes have had to agree to things we would not ordinarily have agreed with so your word "happy" I would translate into my word "satisfied".

  Q1366  Chairman: How long has the debate now been going on between you and the Commission?

  Mr Scudamore: It is about four years.

  Q1367  Lord Peston: My other question which is really what we have to focus on, and we are not investigating the Premier League—

  Mr Scudamore: Thank goodness!

  Chairman: That is our next inquiry!

  Q1368  Lord Peston:—We are investigating the BBC but do you interpret the putative deal as one that would give a chance to free-to-air terrestrial broadcasters?

  Mr Scudamore: Every time we have tendered our rights free-to-air broadcasters have had a chance.

  Q1369  Lord Peston: No-one is going to find a billion quid, it is not a chance.

  Mr Scudamore: Let me just explain. Our rights have always been separated out into packages. Last time our rights were put into four packages, two times 38 matches and two times 31, and therefore if you work on the basis that the fourth package was fourth pick, even if you did simple maths and divide a billion into four, £250 million, producing a fourth package was only worth £150 million, for example in the old rights, so you are talking about having to find £150 million. Now that is a lot of money but it is not out of the realms of the sorts of money that any broadcaster in the UK could pay for rights. Clearly in the way we have tendered the rights we have never stopped anybody from bidding for them. We welcome all bidders, as you would imagine, because it creates a competitive market and in our view the winners will be the winners.

  Q1370  Chairman: Out of this £1 billion that is spent some of that they will have the right to sell on the rights to clubs or pubs or people of that kind, will they not?

  Mr Scudamore: Yes, basically they have the wholesale rights for those packages and then they distribute them as they see fit. Clearly in a free-to-air environment that sell-on right is really non-existent because by definition it is free to air and available to everyone anyway. It is only in a pay environment that you would introduce that notion of selling on wholesale.

  Q1371  Lord Peston: One last technical point, one thing I do not fully understand is I buy the Sky package and I watch the Sky games and clearly since I am not broke it is incredibly good value compared with the cost of going to an actual match. One of the things that puzzles me is that other games are being shown all over Europe and I have never been very clear. Sometimes my mobile phone goes and it is someone I know in Slovakia who says, "Do you know Arsenal have just scored a goal?" The answer is I have got Teletext on at the same time so I do, but that is by the way. What I do not understand is whether you are selling rights other than to Sky to, say, the rest of Europe?

  Mr Scudamore: Yes, we only sell Sky the UK rights. The international rights are sold separately.

  Q1372  Lord Peston: You do sell the international rights?

  Mr Scudamore: We sell to 195 countries outside the UK.

  Q1373  Lord Maxton: Separately?

  Mr Scudamore: 54 different contractors. In our major markets we sell directly to the broadcasters so to Japan, to Asia, to the US we sell to individual countries.

  Q1374  Lord King of Bridgwater: Malaysia.

  Mr Scudamore: In Eastern Europe we sell to a small agency based in the Cotswolds who go round Eastern Europe and do all that.

  Q1375  Lord Peston: All this peculiar stuff people keep telling me about there is a pub you can go to somewhere in East Finchley and you can watch a match that is broadcast by Sky. I have never been clear whether that is legal.

  Mr Scudamore: That is a different issue, that is illegal.

  Lord Peston: I keep saying I cannot go.

  Chairman: Lord Maxton?

  Q1376  Lord Maxton: What about Sky Sports in a hotel in Spain?

  Mr Scudamore: Sky Sports in a hotel.

  Q1377  Lord Maxton: Let me ask you the question. Sky contract out to be shown not just in this country but elsewhere in Europe in particular and in the world for that matter. Can they therefore not show your games on those services?

  Mr Scudamore: It depends, it is not a question of whether Sky can show them or not, it is a question of who owns the cards, so if you have paid for your card and you have paid legitimately for that card.

  Q1378  Lord Maxton: Anywhere?

  Mr Scudamore: Anywhere, and if that card, depending on the technology as I understand, is transportable, then that card may well work elsewhere in Europe, but strictly under the encryption rules and with encryption getting tighter that happens less and less and less and you will have to have subscribed to whoever the owner of those rights is in Spain to get that particular service Sky do distribute Sky Sports News and other channels throughout Europe on to other European broadcast platforms.

  Q1379  Lord Maxton: That is how they do it, right. I have a question about separate club channels. Manchester United, Chelsea and Arsenal, no I do not think Arsenal do but Manchester United and Chelsea—

  Mr Scudamore: Middlesbrough certainly do and Arsenal do in a broadband environment though not in a television environment.


 
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