Select Committee on BBC Charter Review Minutes of Evidence


Examination of Witnesses (Questions 1380 - 1399)

TUESDAY 13 DECEMBER 2005

Mr Richard Scudamore

  Q1380  Lord Maxton: The other two do it in television, right, on a Sky platform, so you can get those two channels. How do they operate? Do they not use live games?

  Mr Scudamore: It was remiss of me in giving an explanation of how we sell our rights at the start not to say that live is sold collectively, near live is sold collectively and free to air highlights are sold collectively. That leaves space on a delayed basis for clubs to have their own rights that revert after a certain window, so generally midnight the day of the match the clubs are allowed then to exploit the rights on their own channels. If you like, it is part of the windowing and we have had that now for some time.

  Q1381  Chairman: Take that in stages, I am not quite sure I understood that. When am I as a viewer, if I am looking at the Manchester United Channel, able to view that?

  Mr Scudamore: To be absolutely precise, and you are testing my memory, for a Saturday match if it is played on a Saturday, by Sunday midnight you would be able to see that match on a club channel. If that game was played Sunday, Monday, Tuesday, Wednesday, Thursday, Friday, you could see it midnight the day of the match. It is only the Saturday games that have got midnight the day after and every other day is midnight on the day. However, in a broadband environment if you are on the Internet and clubs can prove to us that they can geo-block and therefore they are only capable of being watched in the UK (and the technology exists to do that) you can have your own club rights on a broadband Internet system at midnight on the day of the match so Saturday night midnight. That is what Arsenal do and Liverpool do and various others do in a broadband environment.

  Q1382  Chairman: In that situation Manchester pays you nothing; is that right or not?

  Mr Scudamore: They do not pay me anything because they are their rights and all 20 clubs have those rights and all 20 clubs do have moving image on their web sites.

  Q1383  Lord Maxton: They are all subscriber channels, are they not, you have to pay to watch the Manchester United Channel?

  Mr Scudamore: Some do. That is a subscriber channel. Other people use their moving image content in a more promotional environment.

  Q1384  Lord Kalms: When the BBC bids for one of your programmes as a public sector broadcaster, is it inhibited because of the disciplines of promotions and advertising, or lack of advertising? Is it a level playing field for the BBC when it is up against an organisation like Sky?

  Mr Scudamore: I can only speak for the Premier League clearly and it is an entirely level playing field. We would make that decision pretty much on a value basis only, we would not go through any permutations as to what the value of exposure or lack of exposure or lack of commercial imaging or commercial messaging would make. We would not make any calculation on that historically. I cannot see that would change either.

  Q1385  Lord Kalms: What is the BBC's view about getting the rights of football broadcasting? How high a priority has it got? It seems to me they can never win a big battle. It always has to buy the smaller package, does it not?

  Mr Scudamore: Again it is hard for me to say what the BBC's strategy is in terms of any content. Clearly the BBC and ITV to some extent are not the same broadcasters as they were three years ago, five years ago and seven years ago, and in a digital environment they clearly are not just single channel or two channel analogue terrestrial broadcasters. They do have more content, they have more capacity, they have more channels, and in a digital environment they have a different way and they are clearly evolving into being digital content providers just like many others. I think that they take a very sensible approach to it. They know what they are good at and they know what they are supposed to be doing. They have public service obligations clearly but they also have some iconic programming that competes very well with Premier League football. Quite frankly, they have other programming which it does better than Premier League football whether that be in the live environment or other environments, so if you have got Eastenders or if you have got Strictly Come Dancing, we sit here understanding that it would be very hard for Premier League football to compete and generate those sorts of audiences at those sorts of times of night, and they have a scheduling issue and they have to weigh up the value of our rights versus what they can do with other programming, and in that sense whilst they are not supposed to be commercial, it is an entirely business-like approach, it seems to me.

  Q1386  Chairman: Correct me if I am wrong, it is also quite difficult for them to compete in any event financially because, as you have said before I think, BSkyB sell on rights to clubs, pubs and people like that? For your free-to-air broadcaster there is not a great deal of point in doing that, it is impossible to do that because they are free to air in any event. If for the sake of argument BSkyB pay £1 billion and get back three-quarters of a billion pounds in the rights they sell on, for the sake of argument—

  Mr Scudamore:—A compelling one!

  Q1387  Chairman:—Then that is quite a good deal as far as BSkyB are concerned.

  Mr Scudamore: Let's go back to whether they can compete. The reality is that the BBC, particularly with an income that they know because it is a fixed income by way of the licence fee, could if they chose to compete purchase Premier League rights. It is for them and them only and not for me (and maybe it is for you and your Committee) to have a view as to what proportion of that licence fee is justifiable to put towards sports rights. It is not for me to say. It is not true they cannot compete; it is just a question of how much do they want to compete, because they certainly have the money.

  Q1388  Lord Kalms: Has the BBC ever expressed to you their mission statement regarding public sector broadcasting football? Have they expressed to you what their philosophy is or is it just a tender that goes in at a certain stage? Do you understand their thinking?

  Mr Scudamore: In fairness to the BBC, we understand their thinking. We look at their annual reports and we look at their mission statements generally. The Director-General has always taken a keen interest in sport and also the Heads of Sport at the BBC meet with us and they take us through their philosophies and mission statements. We understand where they come from in terms of sport but we are not, as much as we are very proud of our competition, so presumptuous as to say everybody should have a huge interest in buying all of it. Clearly we open up a tender process. Lots of people come along and talk to us and those that bid, bid and those that do not, do not and those that win, win; and that is the way I think it should be.

  Q1389  Lord King of Bridgwater: We have heard lots of comments that the BBC are skilful negotiators and very imaginative in the way that they might approach this to try and create different packages on things that maybe you had not originally suggested. Do you have any comments on that?

  Mr Scudamore: No, not really. I think the BBC, quite rightly, play to their strengths in any negotiation or any promotion of what they do in terms of the equity that comes with having your programming broadcast on the BBC. I think it relates back to the previous question about are they disadvantaged in terms of not being able to commercialise some of their exposure. The balance is that in a sense any negativity, and there is not much of that, which is attached to that is more than made up for by clearly the very, very credible nature of being on the BBC platform. No sports rights' owner underestimates how significant it is to be seen to be on the BBC platform. In a sense they work very hard at marketing even though you might not necessarily think of them as a commercial organisation. Clearly if you look at their promotional work, their promotional trailers, the way they cross-promote, they clearly have some hugely impressive marketing people who do a very good job in my view of promoting the BBC offering.

  Q1390  Chairman: We say it is a three-year contract. We talk about a billion pounds, so do we roughly say that that is just over £300 million a year?

  Mr Scudamore: Yes.

  Q1391  Chairman: Just to go back to the point, it would mean the BBC, to compete with that, using a very big percentage of their annual income?

  Mr Scudamore: But that is for the whole 138 games.

  Q1392  Chairman: I realise that. I am not arguing whether it is up to them or not. I am just commenting that that is the case.

  Mr Scudamore: Yes, it is a true comment, but if you break it down into its component parts, it is £330 million a year for 138 matches. It is about £2.7 million a match which, in terms of 90 minutes of compelling, unscripted drama,—

  Q1393  Chairman: That is looking at it one way, but if you are looking at your income going down the other way, it amounts to over a tenth of the income of the BBC spent on Premier League football.

  Mr Scudamore: If it were to buy it all.

  Q1394  Lord Maxton: Your clubs, of course, play in other competitions which are shown on the BBC?

  Mr Scudamore: Yes.

  Q1395  Lord Maxton: Have you any idea what the BBC pay, for instance, for the FA Cup, and also some of the European competitions are shown on the BBC, are they not?

  Mr Scudamore: I do not know because it is a joint deal between the BBC and BSkyB that shows the FA Cup matches and I do not know what the split of the money is within that class. It is not my business. There are some UEFA Cup matches which the clubs own themselves which sometimes are shown on the BBC but not too many of those, and the Champions League clearly is currently on ITV and Sky.

  Q1396  Lord Maxton: The Scottish clubs seem to have a deal whereby they are shown on BBC.

  Mr Scudamore: As I understand it, most of the Scottish club matches are in a pay-per-view environment with the Sentanta organisation on the pay platform and there are a handful of matches that are exposed on a free-to-air basis in Scotland.

  Q1397  Baroness Howe of Idlicote: You have said quite a lot about your view of the expertise and negotiating skills of the BBC but, looking at it the other way round, when you are looking at who to choose, as it were, what sort of financial judgments do you make between the revenue and the exposure when evaluating a TV rights bid from the BBC? I am thinking particularly, of course, of the importance of it to your growth; I know you are very popular, but nevertheless the continued growth of football grass roots, so exposure versus finance.

  Mr Scudamore: We are cognisant of it but I have to say in all honesty that we do not attach much significance to it because we are extremely popular anyway and, whereas many sports would give their right or left arm (if it did not stop them performing the sport) for free-to-air exposure, we are not in that position. We do not need that exposure for a number of reasons. Remember, a lot of our economics are driven by attendance. If you look at a club's economic basis it is usually about a third, a third, a third: a third from central television, a third from match day revenue and a third from other commercialisation such as sponsorships and other kinds of exploitation. If you go back to the history of the Premier League, one of the reasons it has been successful in our view is that the virtuous circle from day one was large income from a pay television service where the numbers of viewers were not in the first years huge. Combine that with free-to-air exposure promotion through Match of the Day on BBC and it led to this rather virtuous circle where we managed to keep attendances rising extremely fast. If we had gone on day one to full free-to-air exposure one wonders whether the attendances would have suffered, or not risen as highly as they did rise, because a lot of that money in the early days, as you know, in the early nineties, was invested in stadia, so improved stadia with live matches to a relatively small audience when the Sky platform was in its infancy together with the promotional value of free-to-air highlights made for quite an interesting virtuous circle. We recognise the fact that right now the old dynamics of 138 live matches with the sort of penetration that pay television has are altering and there is now an effect on attendance when games are broadcast live, even in a pay TV environment. Certainly when games are broadcast live in an FA Cup environment or a UEFA Cup environment on free-to-air television you see a marked impact on attendance. Therefore, whilst we do not really do a calculation about media exposure, we do an overall look at the effect of media exposure vis-a"-vis attendance because we still are, I am glad to say, first and foremost a competition that is in a spectator sport and the secondary consideration, although it is a big financial consideration, is the broadcasting.

  Q1398  Lord King of Bridgwater: When the test match was getting rather exciting football attendances were seen to slump quite a bit and there was some unfavourable comparison about unsporting behaviour on the football field as against a very much more sporting contest on the cricket field and people were then supposed to be very worried about what was happening to attendances. Have they now come back? What is the overall attendance now that you have got pay TV even more pervasive? What is happening overall to attendances compared to five years ago?

  Mr Scudamore: Attendances are very strong. They have grown consistently since we started. We have pretty much reached our plateau level in the last two or three years mainly because the occupancy rates are over and above 90 per cent, and now the only alteration you will see in our attendances is according to which teams are in the league or not. If a big stadia club comes up or a big stadia club gets relegated, that is the only effect you will see on our attendances. It is interesting that we are here today because mathematically, as of tomorrow night when Everton and Manchester United catch up and play two home games that were displaced from August, I predict that the league average by Thursday morning will be back past where it was last season, and therefore all you have every year is an August effect. There is an August effect every season where at the start of the season in the first five weeks the average is less than for the whole season. Football comes into its own when the clocks get altered and it becomes dark and grey outside and that is when attendances peak, round about Boxing Day, or Christmas and New Year, to be precise, and therefore we are back past last year's attendances.

  Q1399  Baroness Howe of Idlicote: Funnily enough, I was about to ask that sort of question but, thinking about whether the BBC was interested, say, on the cricket side, it clearly at some stage dropped its interest. It did not think it was getting the same coverage et cetera. Are you saying, because this is what I have picked up, that if the BBC suddenly completely lost interest (for whatever reason) in covering any of your football, it would have no effect at all because you have got so much Sky and other forms of coverage?

  Mr Scudamore: No. I think we have achieved a very good balance up till now where the cocktail that is live matches in the pay TV environment and highlights in the free-to-air environment has actually worked; they have helped each other.


 
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