Pay TV phase three document - Stakeholders - Ofcom

Pay TV phase three document – non-confidential version
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� Sports programming represented 54% of Sky’s programming costs in 2007/08,
and 22% of Sky’s entire operating expenses. This is higher than any other
category of operating expenditure – marketing is the next biggest at 18% 21 .
Further, despite the recession, the amounts paid by Setanta and Sky for FAPL
rights in the February 2009 auction were 4% greater than the equivalent figure in
2006.
� Movies programming represented 16% of Sky’s programming costs in 2007/08,
and 7% of Sky’s entire operating expenses. This is significantly lower than Sky’s
expenditure on sports programming, but is similar in magnitude to Sky’s total
expenditure on all third party channels (17% of programming costs) and
significantly higher than its total expenditure on its own news and entertainment
channels (12% of programming costs).
Statements made by market players
3.24 The statements Sky in particular has made both in public and private illustrate how
important premium content, and in particular premium sports content, is in
assembling a pay TV business. The most well-known of these is Rupert Murdoch’s
comment at the 1996 AGM of News Corp (a major shareholder in Sky in the UK) that
sport would be the “battering ram” of pay TV. More recently, a quote from Rupert
Murdoch in a documentary aired on Sky One in June 2007 22 , reveals that:
“In life, if you’re building a company, you’ve got to take risks. And
this [purchasing FAPL rights] was certainly, on the face of it, very
risky. But I knew from selling newspapers or from television
elsewhere that sport is the great, number one common denominator.
And, of that, football [is number one]”.
3.25 Sky recounted the role of sports programming in the story of its own development,
the “Sky Fact Book”, in 2004:
“Sky Sports has been pushing back the boundaries of televised sport
since 1991. It recognised the British public’s insatiable appetite for
sport and sparked a viewing revolution that has changed the way
people watch it. . . . Right from the start, sport has been a major
factor in the growth of multi-channel TV.”
3.26 Trevor East, formerly Deputy MD of Sky Sports, and subsequently at Setanta as
Director of Sport, stated in Broadcast on 26 January 2007:
“Sky was on the verge of bankruptcy and it nearly brought the whole
of the Murdoch empire down, but winning that Premiership was key
to its growth. Hopefully the Premiership and other things we've got
will do the same for Setanta Sports”.
3.27 These quotes are somewhat historical, in that they refer to the past development of
Sky. There is however evidence from information request responses that this also
21
http://corporate.sky.com/documents/pdf/1ffb247d89b6490c9cd3dc7a4f24f4eb/annual_report_2008.pd
f, page 31.
22 Quoted in the Guardian, Friday 22 June 2007, ‘Murdoch warns on football rights’.