Examination of Witnesses (Questions 1360
TUESDAY 13 DECEMBER 2005
Mr Richard Scudamore
Q1360 Lord Peston:
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
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
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
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".
How long has the debate now been going on between you and the
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.
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
Q1373 Lord Maxton:
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:
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
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:
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