Speech given at the Manchester Evening News Business of the Year Awards
Good evening and thank
you for inviting me to speak here tonight. When my office phoned and
asked what subject you wanted me to speak about the reply came back
that I could talk about "anything I liked but could I try to be
both funny and profound".
I thought that's
like the old joke about Max Boyce - who tries to be funny and Welsh.
You can be funny or you can be Welsh but you can't be both.
This is the first time
I've used that joke since the whole Welsh nation went into apoplexy
when Anne Robinson decided to condemn the Welsh to Room 101 so I use
it with some anxiety. At the time of Room 101 there were some in the
Welsh parliament who wanted to summon me, as Director-General of the
Βι¶ΉΤΌΕΔ, to appear before them to explain what I was doing allowing Anne
to be so rude about the Welsh. They didn't seem to understand it
was a joke.
So if there is anyone
Welsh here tonight could I make it very clear that my opening remarks
were a joke and were not intended to be offensive - well not very.
Now I'm very happy
to take questions tonight and my experience at events like this is that
the question and answer session is usually better than the speech so
we'll come to that soon. And of course some things are worth waiting
for.
It is exactly two years
since I joined the Βι¶ΉΤΌΕΔ - two years in which the Βι¶ΉΤΌΕΔ has hardly been
out of the headlines including our former Chairman's account of
life at the Βι¶ΉΤΌΕΔ a decade ago found in the Sunday Times in recent weeks.
I notice that Duke Hussey is now saying he wishes he had sacked my predecessor
John Birt. As he did sack the two Director-Generals before John, you
have to begin to wonder whether it was the Director-Generals who were
the problem or was it possibly the Chairman? Either way the latest Βι¶ΉΤΌΕΔ
chairman Gavyn Davies and I have already agreed a pact - I'll be
nice about him in my autobiography if he's nice about me in his.
Since I joined the Βι¶ΉΤΌΕΔ
I have taken out a lot of central costs. When I got there there were
consultants all over the place and I've never really got on well
with consultants. In fact I've always liked the definition of a
consultant as "a bloke who knows a thousand ways of making love
but doesn't know any women". It's a bit like the definition
of an economist as "someone who is good with figures but doesn't
have the personality to be an accountant".
Right, so having offended
the Welsh, consultants, economists and accountants in the first ten
minutes of my speech, perhaps I should move on.
One of the things I was
determined to do when I joined the Βι¶ΉΤΌΕΔ was to improve its reporting
of business. When I was running profit and loss companies I always thought
that, unlike newspapers, television and radio reported business as if
they were still in the culture of the sixties and seventies and that
profits were somehow seen as the enemy. Anyone who made profits was
interviewed as if they were stealing from the consumer.
As part of my campaign
to change that approach to business - and I think we have made great
strides over the past 12 months - we employed the Editor of Sunday Business,
Jeff Randall, as the Βι¶ΉΤΌΕΔ's first ever Business Editor. He brought
with him a new approach, which has been very successful, but like many
people who join television and radio from newspapers he thought it would
be a breeze. Instead he found it harder than he expected as he described
in an article in last Sunday's Telegraph. I'll read some of
it.
"The greatest difference
between broadcasting and newspapers is the drunks. In newspapers the
drunks are inside the newsroom. In television they're standing
on the street heckling you.
"I was doing a two-way
outside the Bank of England. The voice in my earpiece said Β‘coming
to you in ten seconds Jeff, tell them why interest rates are going down'.
As I stood there, shaking with nerves, a car pulled up with four Essex
girls in it and they shouted Β‘oi tosser get your trousers off.'
It's hard to look at camera and think of Eddie George after that."
In another part of the
article Jeff describes waiting to talk about the decline of Marks and
Spencer, a subject he knew well as a business reporter. The presenter
of the Six O'Clock News turned to Jeff and said "Jeff what
does it all mean for shoppers?"
"Shoppers"
thought Randall, "I had never thought of shoppers and I could hear
a little voice saying Β‘well I'm buggered if I know' and
that's what I wanted to say on the Six O'Clock News Β‘I'm
buggered if I know. Instead my mouth went up and down and nothing came
out. It was ghastly."
On another occasion Jeff
was asked by the presenter of the Ten O'Clock News what he thought
of the management of Marconi. "I just wanted to say Β‘they're
a bunch of prats'" wrote Randall "but of course I can't
say that on the Βι¶ΉΤΌΕΔ. I had to find a way of saying exactly the very
same thing but making it acceptable to the nation."
Jeff is without doubt
my best signing since I joined the Βι¶ΉΤΌΕΔ - if only for the jokes.
I am pleased to be here
in Manchester because, although I was born and bred in London, part
of me is Mancunian. My partner for the past twenty years is a Manchester
girl - she was born in Walley Range and went to school at Loretto -
but that's not really why Manchester has a special place in my
life - my heart is here because of Manchester United.
I'm one of the thousands
of southerners who has supported United since they were kids. My love
affair with United began in the mid fifties when I refused to join my
elder brothers in supporting Tottenham, where my grandmother had a pub
just down the road from the ground, and instead I supported the Busby
babes. So I cried at Munich, was depressed in the bad years in the seventies
and eighties and have been celebrating virtually ever since.
Given my lifelong commitment
to United you can imagine how excited I was back in 96 when I was asked
to join the Board of Manchester United - a job, sadly, I had to pack
up when I became Director-General of the Βι¶ΉΤΌΕΔ on the basis that it was
seen as a conflict of interest to both buy and sell football rights.
My kids have never forgiven me for joining the Βι¶ΉΤΌΕΔ because of that.
To give up four seats
in the directors box at Old Trafford in exchange for a job where you
end up the Daily Mail whipping boy is hardly a fair swop in their eyes.
In fact I'm not sure it's a fair swop in my eyes but at least
I took the decision.
Of course I was on the
Board of Manchester United when BskyB tried to buy the company. I think
it is well known that I was very much against the deal in principle
and personally I was delighted when the Monopolies Commission came out
against the takeover.
While I was on the board
I also faced one of those dilemmas which parents shouldn't have
to face. My eldest son was at university here in Manchester during the
years I was on the board at Manchester United. Incidentally when I couldn't
get to the game he used to use all four tickets in the directors box
- something which did no end for his popularity amongst his fellow students.
Anyway my dilemma came
when Manchester United got to the final of the European Champions League
which was to be played in Barcelona on the night before one of his finals
exams. He asked me for my advice, should he go or not? I thought for
all of two seconds and said "Matthew by the time you are 31 no-one
will give a toss what degree you got; but if you don't go and Manchester
United beat Bayern Munich to win the European Cup you'll regret
it forever."
He came, we won, and
he got terrible marks for his exam. But he was there, it will always
be one of the great nights of his life and he hadn't done enough
work to get a first anyway.
My younger son was also
in Barcelona that night and he was with me again earlier this year when
England beat Germany five-one in Munich. I said to him that night that
there he was just 14 and he'd sat through two of the greatest football
occasions of my lifetime. He didn't seem at all impressed. Such
is youth.
So back in Manchester
I thought I'd use the opportunity to say a few serious things about
sport and particularly sports rights and the Βι¶ΉΤΌΕΔ.
As you know until a decade
or so ago the Βι¶ΉΤΌΕΔ had most television sports rights in this country
although it is worth remembering it never had much live football. In
fact I think there will be more live football on the Βι¶ΉΤΌΕΔ this coming
year than in any year in its history.
The Βι¶ΉΤΌΕΔ's dominance
of sport changed firstly with the arrival of pay television followed
by the boom in television advertising over the last decade. The result
has been that the Βι¶ΉΤΌΕΔ has lost some of the sports rights it traditionally
held to commercial rivals. We couldn't afford - or chose not to
afford - to pay the prices they were paying.
During that decade the
cost of sports rights grew at a ridiculous rate. We've now reached
the stage when Sky are paying Β£6 million a match for their 66
Premiership games - imagine paying Β£6 million for the rights to
watch Derby versus Southampton - when ITV Digital are paying Β£100
million a year for their Football League contract where some games get
ratings so low it would be cheaper to send out videos; and ITV's
highlights show The Premiership costs some 8% of ITV's total programme
budget - and it is about to be moved out of peak time.
It might surprise you
but I don't criticise ITV for trying the Premiership in peak time
on a Saturday night, in fact I quite admire them for making the decision.
It was a risk but risks have to be taken in all areas of business and
the very nature of risk means some fail.
Where I did criticise
ITV when they won the Premier League rights - and remember the Βι¶ΉΤΌΕΔ won
back the FA Cup and English internationals the same week - was the price
they paid for them. At the time it was seen as sour grapes on my part,
and it probably was because Β£60 million was a ridiculous figure,
but ITV are now going to play The Premiership in exactly the same slots
as we used to play Match of the Day last year - the only difference
being that they are paying Β£60 million a year for the rights and
we used to pay Β£20 million.
Ladies and Gentlemen,
I think this is all about to change. I believe that the costs of sports
rights have hit their peak and that the massive escalation seen in the
past decade is coming to an end. In fact I believe some contracts -
the Football League for instance - are so over priced that there is
no chance anyone paying anywhere near such large figures again.
Let me explain why I
believe this is likely to happen.
The massive inflation
in sports rights was fuelled firstly by the arrival of BSkyB, the cable
companies and ITV Digital - in other words the pay television platforms.
More than 20 million people now live in pay television homes in this
country and yet all three platforms are in financial difficulties. None
are making money although Sky may be cash positive next year. The other
two - cable and ITV Digital - have deep financial problems which weren't
around when the last football rights were sold 18 months ago. They are
all losing money because of the cost of sports rights. Next time the
pay rights are up for grabs there could well be only one bidder - and
if that is the case you can be certain Sky will pay the Premier League
a much lower price next time.
The second factor in
sports rights inflation came with the boom in advertising revenue over
the past decade. This gave ITV the money to treble the amount paid for
the recorded Premier League highlights. But suddenly advertising revenue
has collapsed as some of you know only too well. ITV's revenue
this year is down 15% on last year and next year's is expected
to be a further 10%. It is the biggest collapse ever in television ad
revenues and will certainly restrict ITV's ability to bid for sports
rights in the future. I doubt whether ITV will offer Β£60 million
for the Match of the Day rights next time around - and one thing is
certain, we certainly won't.
Sports rights holders
are beginning to discover that the world is changing. A year ago ITV
and the Βι¶ΉΤΌΕΔ bid Β£55 million for the rights to next year's
World Cup finals. The German company, which owns the European television
rights, asked for Β£170 million. Last week they settled for Β£60
million. In fact we bought the rights to the 2002 and 2006 World Cups
for less than they were asking for 2002. And remember 2006 is much more
valuable because it is being held in Europe.
So what does all this
mean? Well if I was still on the board of Manchester United I would
be warning my fellow directors to be very careful. Don't go signing
five-year contracts with players at inflated salaries on the assumption
that the next time the television rights are coming up there will be
another big jump in the price as there has been in the past. I believe
the opposite could happen and there could well be a big fall in the
amounts paid.
The boom in television
revenues have funded an amazing escalation in players' wages in
recent years. Now that boom is coming to an end I think increases in
players' wages will also have to come to a stop. The only trouble
is I don't think they will stop and as a result some clubs will
end up in dire financial problems and over the next three or four years
and some could actually go bust.
Of course that won't
happen to Manchester United - that's always assuming Barthez stops
giving goals away - but along with all other Premier League Clubs who
are public companies they will have to cut back if they are to give
their shareholders a decent return. Of course there is an argument that
Football Clubs aren't suited to be public companies at all but
that's one for another day.
Ladies and Gentlemen,
everyone I know who runs a television operation in this country - pay
or free-to-air - knows that they are paying too much for sports rights,
particularly for football, and they are determined they won't pay
that much again. They can't afford it and some sports aren't
delivering enough value. The gravy train for football in particular
is coming to an end.
If I am right it will
have serious consequences for everyone in football unless they can find
new sources of income.
Even the club closest
to my own heart, Manchester United, should be worried - although not
as worried as they should be about their defence.
Thank you.
Printable version