Digital, Interactive and Web TV

Controversy 2000 (January-April)

• April 2000: Government puts pressure on TV companies to pay sports levy. BBC concerned.
  • The high fees for broadcasting rights is causing a polarisation within sport, particularly football but also tennis, rugby and cricket. Those clubs able to secure broadcasting rights are very rich and thus able to attract high quality players from non premier clubs. There is concern that smaller clubs will not survive and this in turn will cut off the supply of new talent into the sports. The Government is proposing a voluntary levy of at least 5% and preferably 10% on all broadcasting rights. If the various sports don't comply then legislation is threatened as they do in France. The various sporting bodies will be responsible for distributing the money not only to local clubs but also schools.
  • The BBC is alarmed at the proposals. It feels the Government will be less inclined to insist that only the BBC should broadcast major national sporting events (known as "the crown jewels" list). At the moment the Government has said that such events should be available to a wide public audience. Already cricket has been removed from the list. The BBC feels that the Government may see the levy as a way of reducing its public subsidies.
  • Some relief was felt in August 2000 when the European Commission said that "crown jewel" events must be made available on free-to-air stations. Events included Olympic Games, World Cup finals, FA Cup Final, the Scottish FA Cup Final, the Grand National and the Derby horse races, Wimbledon Tennis Finals, the European Football Championship Finals, the Ruby League Challenge Cup Final, and the Ruby World Cup Final. The list does not include any cricket or golf matches.
  • In 2001, the German Kirch Group obtained the European viewing rights to the 2002 World Cup. In 1998 for the last World Cup the BBC and ITV terrestrial channels paid £4m. This time they offered £50m but the Kirch Group wants far more. But of course, under the "crown jewel" agreement the free-to-air terrestrial channels have a right to show the games and the Kirch Group cannot sell to a competitor such as BSkyB. When in April 2001 the Kirch Group said it was going to go ahead and auction the rights to the highest bidder, the government admitted that the "crown jewel" concept had no force in law.
• April 2000: Society of British Advertisers urges Government to consider advertising on BBC
  • The Society is very concerned with the proposed merger of between Carlton and United News & Media and/or Granada. This would result in one company having control of 60% of all television advertising. They would like the BBC to show limited advertising and have sponsored programmes. This would provide more competition and help to keep advertising rates down. It would also address the financial requirements of the BBC which needs to heavily invest in digital TV. Many consumers however would be sure to resist such a move.
• April 2000: Footballer George Best takes out injunction against Sky over film release
  • Sky has provided 30% of the £5m budget for this British film based on the life of George Best the famous footballer. Sky wants to show the film on its satellite channels at the same time as it is released on the cinema circuit.Best believes this will seriously damage its commercial success and has made an application to the courts to stop Sky. Sky says the contract allows them to show the film at the same time.
  • When the film industry made most films and owned the cinemas this sort of situation would not arise. Today, with cross channel ownership, multiple channels to market and a fragmented film and TV industry, disputes such as this one are more likely.
• April 2000: BSkyB urges Government to auction digital terrestrial frequencies rather than give them to ONdigital
  • Whilst the auction for the mobile frequencies broke through the £10bn mark (they eventually reached £24bn), BSkyB urged the Government to do likewise with the digital terrestrial TV frequencies. No doubt BSkyB's deep pockets would see it acquire some of the frequencies. Naturally, ONdigital, who were granted a 25 year licence in 1998, fiercely opposes the idea.
• March 2000: Government concerned at end of ITV's News at Ten. BBC seizes the opportunity.
  • The British Government expressed concern at the proposal by ITV (the UK commercial channels) to move its 10 o'clock news program to 11 pm. The Government argued that viewing figures would drop and that this would weaken democracy as the public would be less informed. ITV wanted the change so that it could schedule feature films in the peak evening viewing period without the need to have a long interval for the news. Others argued that in the digital and Internet age, people had multiple channels and devices upon which to receive the news. For example, there is 24 hour news channels via cable and satellite and people can receive sports results on their WAP mobile phones. Despite the Government's pressure the company did make the move. The news viewing audience did indeed fall by 17.5% to 9.4m but the peak time audience grew by 1%, generating an additional £50m to £70m in revenues.
  • The BBC, who had been fighting a battle with the Government for an increase in the licence fee to fund its digital TV role out, saw this as an opportunity to get into the Government's favour, and promptly moved its 9 pm news to 10 pm which boosted its viewing figures by 15% to 12.1m. Later ITV reinstated News at 10 from Monday to Thursday evenings.
  • In July 2000, BSkyB said it was seeking permission to bid to supply the news for ITN when the existing contract is renewed for a further 10 years in December 2000. It was hoping that the Government would view its application in good light following the above fiasco.
• March 2000: Talksport asks OFT to investigate BBC Test Match Cricket rights
  • Talksport (formally known as Talk Radio) argues that the BBC is stifling competition by cross-subsidising its programmes across several media strands and that this is in contravention of the 1998 Competition Act. Commercial companies like Talksport are not allowed to own both significant radio and television interests. Apparently, the BBC's ability to cross promote was a deciding factor in the England & Wales Cricket Board awarding the broadcast rights to the BBC even though Talksport offered more money.

• March 2000: Opening round of bidding for Premier League Football viewing rights

  • Back in October 1998 BSkyB acquisition of the Premier League Football viewing rights was refered to the Monopolies and Merger Commission on the basis that most consumers would be denied TV access to the national sport. In the event, when the MMC reported in April 1999, it allowed BSkyB to keep the rights. Now in March 2000 there are many more players such as, NTL and ONdigital, who are likely to enter the bidding for the rights from May 2001 when BSkyB's licence expires.
  • This time there will be 3 licences issued covering 66 live games, 40 pay-per-view on a match by match, and highlights to be shown on free-to-air television. Whilst BSkyB, as the incumbent and with its recent innovation in interactive TV, has a strong hand it is likely to not bid for exclusive viewing rights as this is again likely to bring it to the attention of the MMC.

• January 2000: OFT to review BSkyB's pricing - BSkyB counter charges

  • The OFT is to review the charges BSkyB makes to cable operators who offer BSkyB channels. In 1996 BSkyB had given the OFT formal undertakings not to excessively charge the fledgling cable companies. Now, with consolidation of the cable industry and ownership in the hands of large global companies, the undertakings may no longer be appropriate. The result could be higher charges and greater bundling of channels. Both Telewest and ONdigital welcomed the review as they saw an opportunity to make representations about the way BSkyB conducts its wholesale operations. BSkyB counteracted that the cable companies were themselves bundling channels and telecoms services. A subsequent OFT investigation cleared the cable companies but said that they should make their choice and pricing of services more transparent.
  • In June 2001 the OFT said it was extending its inquiry indefinitely. It was due to complete this month.
• January 2000: BBC's new director general forced to sell media shares
  • Greg Dyke, the BBC's new director general, was criticised for still holding £6m shares in Granada, one of its main commercial rivals. Prior to his appointment he had agreed to sell any stocks where there might be a conflict of interest and he had in fact sold shares in 4 media companies. The BBC said a deadline of April had earlier been agreed. Dyke quickly sold the shares only to discover he still had shares in Pearsons. Dyke said the shares were in trust and proceeds would be given to charity.
  • Dyke again courts controversy over share holdings.

• January 2000: CBS News accused of digital manipulation

  • When CBS was broadcasting live millennium celebration scenes from New York's Times Square it wasn't happy that there was a prominent advert from their rival NBC. So, using virtual imaging technology developed for the military during the cold war, in real-time it replaced the ad. with one of its own. This technique is also being used by some sports channels, for example Sky TV. It allows them to replace static display adverts in the stadium with different adverts for the various feeds it delivers to broadcasters in different countries. Formula 1 motor racing is investigating the technique to "remove" the tobacco advertising that is found on many racing cars for those countries where such advertising is banned.
  • Whilst the use of this new technology for advertising is generally accepted, many are concerned about its application to news stories which are supposed to show reality.  
• January 2000: Two massive world mergers to be investigated by US & European authorities
  • On 10 January 2000, AOL and Time Warner stunned the world when they announced a $350bn merger, the biggest ever in corporate history, with AOL paying $184bn for a 55% stake in new company. Within days Time Warner and EMI announced that they would also merge to form a £10bn ($15bn) joint venture. In response both the USA the EC regulatory authorities opened 2 inquiries. The EC said there were concerns with the vertical integration of Time Warner content with AOL's online services, especially in the light of AOL's joint promotion, distribution and sales arrangements with Bertelsmann. It was also concerned that the Time Warner - EMI merger would dominate the music market, taking 27% of the global music market. It would reduce the European market to having just 4 players: Time Warner/EMI, Sony, Segram/Universal and Bertelsmann. The companies concerned said they were prepared to give way on certain issues -  for example to allow other companies to use their networks to deliver content - but EMI also argued that the music industry should not continue to be narrowly defined but expanded to include the new media and the internet.
  • On 6 October 2000, a few days before the  expected EC decision, Time Warner and EMI called off their planned merger when it became apparent that the EC wanted substantial concessions. EMI said it ran out of time in formulating a response to the EC's concerns and that it hoped to return later in the year with fresh proposals. City analysts and shareholders were pleased as they feared that EMI would lose management control in any merger. Further, the EC may have required that some of EMI's prize music assets, like Virgin Records, would have had to be off-loaded and therefore sold at a low price. Shareholders were shocked to hear that the failed merger cost EMI £43m in fees.
  • Some think Bertelsmann would be a better suitor for EMI, but together they would control 25% of the global music market - hardly any less than the EMI-Time Warner proposal. But many agree that on its own EMI is too small for the world stage. By November it was official: Bertelsmann had approached the company with a view merger. Meanwhile the rest of the music industry is fuming because Bertelsmann made a deal with Napster, the internet service that allows surfers to swap music for free. Co-incidently 2 senior executives resigned from the company. Bertelsmann said it would introduce a subscription fee for Napster users but many thought that this was unachievable.
  • On 12 October 2000 the EC cleared the Time Warner -AOL merger. Approval by the US regulators was eventually forthcoming. See US Regulators relax same media ownership rules and to review cross media ownership.

Forward to Controversy May-December

JS

External Resources

1. See the Controversy Content page for a list of resources prior to 30 July 2000
2. Anon, 2000, EC hitch for $20bn music deal, Sunday Business, 10 September 2000.
3. Cope, Neil, 2000, EMI aims to revive Time Warner merger, The Independent, 6 October 2000.
4. Goodman, Matthew, 2000, New talks on Net and TV racing, Sunday Business, 20 July 2000.
5. Leader Column, 2001, BSkyB deserves a sporting chance, Sunday Business, 29 April 2001.
6. Lister, David, 2000, BBC digital channel 'to be home of arts on TV', The Independent, 18 August 2000.
7. Lister, David, 2000, BBC programme cash to rise by 30 per cent [plus news on channels revamp], The Independent, 26 August 2000.
8. Lister, David, 2000, BBC experiment puts arts shows on digital channel, The Independent, 23 October 2000.
9. Lister, David, & Moyes, Jojo, 2000, Ministers clear way for ITV giants to merge, The Independent, 13 December 2000.
10. Lister, David, & Moyes, Jojo, 2000, Smith lets BBC off the hook in broadcast shake-up, The Independent, 13 December 2000.
11. McIntosh, Bill, 2000, Clubs 'may take charge of football broadcasts', The Independent, 20 October 2000.
12. Morrison, James, 2000, 'Crown jewels' of sport must be free for all to watch on television, says EU, The Independent, 22 August 2000.
13. Power, Ben, 2000, BSkyB in joint bid to stop Carlton winning horeseracing media rights, The Independent, 13 October 2000.
14. Rees, John, 2000, Dyke orders BBC to tune into business, Sunday Business, 16 July 2000.
15. Robins, Jane, 2000, BBC backs down in battle over website, The Independent, 12 October 2000.
16. Shah, Saeed, 2000, Bertelsmann approaches EMI for music merger discussion, The Independent, 11 November 2000
17. Thackery, Rachelle, & McIntosh, Bill, 2000, Carlton makes late £400m bid for racing rights, The Independent, 9 October 2000,
18. Warner, Jeremy, 2001, Bertelsmann to introduce Napster subscription fees by middle of year, The Independent, 30 January 2001.
19. See the full list of resources for this web site for other related resources.

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