Sports Events of National Interest: MNet & SABC briefing

Meeting report

SPORT AND RECREATION PORTFOLIO COMMITTEE
12 June 2001
SPORTS EVENTS OF NATIONAL INTEREST: MNET AND SABC BRIEFING

Chairperson: Ms N Bhengu

Relevant Documents:
M Net SuperSport Presentation
SABC Presentation (see Appendix)

SUMMARY
The implementation status of the Broadcasting Act of 1999 was discussed with sports broadcasting networks. Delegates from both SABC and MNet gave presentations on the limited success of implementing the Act. The representatives from eTV were unable to attend the meeting due to a prior engagement and said they would meet with the portfolio Committee at a later date.

Many Committee members were displeased with the absence of any substantial progress since the mandate to provide access for citizens to watch sporting events of national interest went out in 1996. Members were clearly unsympathetic to various excuses that both networks gave for not coming to any kind of agreement in almost eight years of deliberations. The Chairperson stated that the Committee would be increasing their role in the mission to provide all-access national sports coverage.

MINUTES
Introduction
Several broadcasting company agents were present at the meeting. MNet's delegation consisted of the Chief Executive Officer, the Chief Financial Officer, a legal team advisor, and the director of SuperSport Enterprises. The acting director introduced the panel and told Parliament that they unequivocally supported the Broadcasting Act of 1999 and were ready to start "walking the walk" now.

As a subscription network, MNet cannot have exclusive rights to sporting events of national interest. Coming to a consensus among the networks would not be easy because they are all very different types of television networks with different agendas.

The SABC chair of sports introduced his delegation which consisted of two other high-ranking officials in the sports section of their network. He apologized that their CEO could not be present at the meeting.

SABC was passionate about issues of public service, which included open coverage of national sporting events. SABC would soon be going through a thorough review of their sports programme and would be happy to report again to the Committee after the review is completed.

Chairperson Bhengu said that the purpose of the meeting was firstly to allow broadcasters to identify what exactly they consider to be "sporting events of national interest."

Second, it was to allow them to present the inter-network negotiations that were supposed to be set up following a meeting between the broadcasters and the Minister of Sport and Recreation held in Pretoria the previous Friday. She wanted to speed up the process of setting goals and implementing a structure to reaching those goals.

MNet's Presentation
SuperSport Enterprises Director M Patel gave the presentation on behalf of MNet as to their strategy in implementing broadcasting of national sporting events to all South Africans. He noted that MNet signed a "code of conduct" agreement in 1998 with the IBA and had not held any exclusive rights to specified sporting events since that agreement.

Mnet has a dual role, first as first, a business, and second, a national contributor. He discussed the difficulties in dealing with sports federations who hold the rights to the broadcasting of their sporting events.

The proposed deadline to set up a meeting to determine these "events of national interest" would be 15 July 2001. The final deadline to for SABC, eTV and MNet to present a list to the Minister and ICASA would be 30 July 2001.

Legal advisor A Armstrong also stated that ICASA will be creating a public discussion paper and holding public hearings to survey the opinion of its viewers. This process will help determine the shortcomings of sports coverage to all sectors.

MNet recognised that the process of bringing the broadcasters together to come to a consensus was exceedingly slow and shared in their frustration.

SABC's Presentation
SABC's status on implementing the federal mandate for opening up channels of sports broadcasting was presented. It would take at least 12 to 18 months to come to any kind of full agreement on which events would be considered "of national interest."

SABC, as a public carrier, had the double burden of national mandates to carry a certain amount of local programming, as well as being a functional and competitive television station in a growing market.

SABC does not have the proper funding to go after high-name events such as World Cup Soccer Games or Olympic Games because those rights are held by international federations that charge exorbitant fees. Often SABC is offered tape-delayed broadcasts of sporting events that reach the public long after the conclusion of the actual event.

As the official national television network of South Africa, SABC wanted Parliament and this Committee in particular to assist in fulfilling its local programming obligations. Local sports, which supposedly appeal more to a black audience, get less advertising support because they are catering to a lower economic bracket. Whereas international events attract a more affluent marketing base to bring in advertisers.

Discussion
Adv P Swart (DP) stated his disappointment as nothing seemed to have changed since the last meeting they had over a year ago. Was anyone making any kind of effort to drive the move to open access sports coverage. He demanded examples from MNet on their actual progress since 1999. He asked SABC to scrutinize and explain the priorities of their expenditures. SABC still shows Formula One car racing every week that are not events of national interest.

Mr R Moropa (ANC) also expressed his frustration with the broadcasters lagging efforts and asked to see the 1999 list of National Sporting Events to which Patel was referring. He said that there needed to be much more dialogue with the Department of Communication and they needed to take a step in pushing ICASA into action. Eighteen months was far too long to deprive people of viewing sporting events of national interest.

Mr E Ferreira (IFP) scolded MNet for saying nothing of any value in their presentation. SABC was giving the same excuse of lack of funding. He accused MNet of being too legalistic and SABC for wanting more than they can handle as a network.

Mr J Louw (ANC) also displayed his disappointment. It had been almost eight years since the process has started and there is still no sign of progress. He gave an example of the Bafana Bafana national soccer team match versus Zimbabwe that was shown on eTV last week. Many rural areas do not get access to eTV and, therefore, are excluded from an event that holds national concern. He felt that everything was back to square one.

Dr E Schoeman (NNP) said that SABC should bid for international events as if they were a competitor in the market. MNet looked into starting a free satellite service to outlying rural areas so that all could have access to sports coverage and other television programming.

Mr H Chauke (ANC) suggested that the Committee should step in as a driving force to push the broadcasters to progress. What could the Committee do to help the broadcasters?

Mr R Pieterse (ANC) asked why eTV is never present at any of the Committee's meetings. He also stated that the real winners in this fiasco are the sporting federations and the Committee should assist in regulating and funding the federations so that they do not charge such high prices for the rights to broadcast their events. He said ICASA should be a driving force in this push.

Mr D Lee (DP) asked what MNet considered to be a sporting event of national interest. He realised that the public enterprises can never really compete with the buying power of the private firms and, thus, the government ought to increase their funding of SABC. The public provider currently receives only 2% of its income from the government.

The delegation from the SABC replied by saying that they are at the Portfolio Committee meeting to seek wise counsel from the MPs. They felt that the meeting between the Minister and the broadcasters should have been chaired by a neutral force from the Parliament.

SABC recognised MNet's commercial imperatives but noted that SABC has commercial tasks to fulfill as well. Plus, SABC must follow all of its governmental obligations to provide local programming. For example, in next week's Bafana Bafana game versus Burkina Faso, SABC had to spend a lot of money on purchasing the rights from the Burkina Faso soccer federation.

He noted that SABC does do local and national interest soccer, cricket, athletics and boxing contests. They also focus on minority and youth sporting events. However, federations do not notice such moral causes. As an example, the South African soccer federation has given rights to next week's South Africa versus Congo game to eTV, despite the fact that eTV does not reach all homes in South Africa.

MNet said that they would like to just put aside all their issues and implement a plan of action. They would like to adopt a workable approach by receiving concrete suggestions from the Portfolio Committee. They begged that Committee to use its influence in shaping ICASA and making it a more efficient organisation.

Mr Patel stated that the suggestions of Chauke and Pieterse were much more constructive than the reprimands given by many of the other members. He again repeated that MNet does follow certain moral obligations set by the country but it is, first and foremost, a business.

MNet has supposedly attempted many efforts to be cooperative including securing certain cricket and rugby events for SABC. However, MNet must consider its corporate obligations as well.

As the delegate from SABC was about to reply to MNet's allegations, the Chairperson cut off his remarks. She allowed the arguing between the two broadcasters to go as she wanted them to realise just how far away they truly were from reaching any kind of effective agreement.

She warned MNet not to defend the sporting federations for taking advantage of struggling networks all over the continent. The Committee is responsible for righting all wrongs whether they be by the broadcasters or the federations.

MNet was not doing enough grassroots sports promotion in the provinces and the examples they had given were simply untrue. The Committee had just returned from a tour of KwaZulu-Natal and had not seen any of the programmes Mr Patel had mentioned in his presentation. More money had to be spent on developing sports programmes in local areas.

She agreed that the negotiating process was complicated, but reminded the broadcasters that South Africa adopted a new Constitution and created a democratic government in less time than it is taking these broadcasters just to hold a dialogue. Nothing would ever get done at this rate.

She wanted to see targets, issues and outcomes in these presentations and did not see any of these. She reminded the broadcasters that even the ministers are accountable to the Parliament and that just because they had met with Minister did not mean that the Committee would be satisfied with their progress. Why had the minister taken so long to call a meeting in the first place?

The Committee would take an active role in driving the campaign to provide national sports coverage to all citizens. The Committee would also engage ICASA as well as the sporting federations in more dialogue. The reason for holding these meetings is to get work done and not to waste time going back and forth.

Though the broadcasters wanted to respond to the Chairperson's remarks, Bhengu did not wish to continue with any more bickering. She adjourned the tension-filled meeting with a charge to the broadcasters to come back next time showing signs of progress.

Appendix 1:
SABC PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON SPORT AND RECREATION

12 June 2001

INTRODUCTION
Matters related to sports of national interest and the broadcast of sport events of national interest have been at the forefront of concerns of the SABC, and of course the greater majority of South Africans, for some time. It is with gratitude that the SABC wishes to express its thanks to you Honourable Madame Chair and your colleagues, the Honourable Members of the Portfolio Committee for this opportunity to address you on this important and critical matter.

The social and political importance of sport in our nascent democracy cannot be underestimated. The sense of national pride and unity that our national sports events promote is common cause. In addition, the social impact of drawing youth and other "at-risk" members of the community into sports, as participants and spectators, is highly significant. Youth on the sports fields, and of course watching sport on Television or hearing it on Radio or surfing the Net, are far less likely to turn to drugs and crime.

Television and Radio are one of the primary mechanisms for popularising sport and indeed its development through financial investments (rights acquisition) and airtime promotions. For this to be maximised it is therefore of national importance that the broadcast of national sporting events is accessible to the maximum number of South Africans.

The SABC is the place where this can, does and in all instances, should occur. The reasons for this are obvious, in terms of Television, SABC Channels have the greatest footprints and have the majority audiences whether taken singularly or collectively compared to any South African broadcaster. In so far as Radio is concerned, SABC is the largest provider of live sport content. Though the main concentration today may be on Television, it must be recognised that the rights acquisition for television, radio and the Internet are to a large extent intertwined. For SABC then the issue of radio broadcast is of fundamental importance as this is for many South Africans the only media available.

It is not and would not be appropriate to look at the SABC's perspective narrow-mindedly. It is important to understand holistically the complexity of this matter under debate as we collectively seek to move forward. We have summarised this to three main areas viz.

(a) Legal and Policy (b) Commercial Imperatives (c) Strategic Considerations

In this presentation SABC will seek to clarify its position on the above

CURRENT SITUATION
Allow us though Madame Chair to deal with the outstanding issue of the interim co-operation between the broadcasters. The SABC is committed to co-operate and fulfil the letter and spirit of such. The process and agreements so far, can be summarised as follows:

(a) There have been meetings between the broadcasters and the Minister of Sport and Recreation. Out of which each broadcaster submitted a list of events they regard are of National Interest. Such a list has been consolidated to those events where there is agreement and those where there is none. Agreement still then needs to be reached on where there is disagreement. (b) In the last meeting, this past Friday, it was agreed to set up in the interim a Committee along the lines as proposed by the Minister. This will however be preceded by a working sub-committee of the broadcasters to agree on the following matters 1. Principles that will govern the interim arrangement 2. Criteria to be used in the interim to decide on events of national interest. 3. How current long term contracts as well as issues of renewal will be dealt with. (c) A mechanism and process need to be found to assist ICASA to expedite a more permanent position as envisaged by the Act. (d) It was equally agreed to co-operate with each other wherever possible to ensure that the majority of South Africans should have free access to these events of national interest The SABC is committed to co-operate fully to achieve the above.

PERCEPTIONS ABOUT THE SABC
Madame Chair the SABC begs your indulgence to clear some historical perceptions before dealing with the central issues it wants to submit today.

In the past certain perceptions have been created about SABC when it comes to sport rights acquisition. The first was that SABC did not know what it is doing in this area and was ill informed in deciding what rights it wants to acquire. In essence an impression has been created that SABC is incompetent and wasteful. This is far from the truth, the SABC will acquire rights based on a strategy to fulfil its mandate, meet its audience needs and be viable.

The second perception was, it is expected and is okay for it to lose money so long as the product is on air. This was compounded by the misguided impression that the SABC has got a pool of money sitting somewhere in government where it can always dip in. The Broadcast Act is clear that the SABC public services will derive their revenue from licence fees, sponsorship and advertising revenue.

The reality is that whilst Government is the sole share holder, the bulk of SABC funding (70%) comes from Advertising, 18% from Television Licence Fees and 2% from Government Sponsored Programmes or Projects, eg election coverage, educational and health programmes, etc.

The third perception was that the SABC because it is a public broadcaster it must be the dumping ground for programmes not wanted by other broadcasters. In addition it must develop sport for other broadcasters to then cherry pick because of their financial strength. Whilst SABC is committed to the development of sport across the divide however there must be an equitable commitment from other broadcasters to do likewise. It is unacceptable that they only invest mainly at the elite end (e.g. SABC invest a lot in developing boxing champions only for these to be poached by pay channels when they have to fight for world titles).

LEGAL AND POLICY ISSUES
From the SABC's perspective, the notion of "sports of national interest" took on a new and important face with the enactment of the Broadcasting Act No 4 of 1999. The legislature, sensitive to the fact that it is in the public interest for South Africans to be able to enjoy the broadcast of sporting events of national interest provided at clause 30(7) that:

"Subscription broadcasting services may not acquire exclusive rights for the broadcast of national sporting events, as identified in the public interest from time to time by the Authority in consultation with the Minister [of Communications] and the Minister of Sport and in accordance with the regulations determined by the Authority through a public process".

However, this clause cannot be read in isolation. It must be read with another important section of the Act, Section 10(1)(i), which states that the SABC must :

"include national sports programming as well as developmental and minority sports" (10(1)(i)).

The intention of the Act in respect of the broadcast of sport is therefore very clear. It implicitly recognises the enormous importance of sports in the lives of South Africans and further obliges the public broadcaster to ensure that South Africans can watch the sports of their choice, be they national events or minority sports.

From a legal perspective, it is also important to note that the section provides that it is in the domain of the activities of ICASA to both identify the sports of national interest in consultation with the Ministers and to determine relevant regulations through a public process.

The process mentioned above, would seem to involve the following:

1 ICASA to consult with the Minister of Communications and the Minister of Sport and Recreation; 2 The Authority to make its findings known; 3 The Authority to hold public hearings to determine regulations; 4 The Authority to publish draft regulations either before or after the hearings and follow the necessary process to ensure that those regulations are passed.

We at the SABC understand that this process has not yet begun but have obviously been given indications by the Ministers concerned that they are acutely aware of the policy matters relevant in this regard. It is therefore important that a time frame be established with ICASA for the establishment of hearings and an approach to both identify and then regulate in relation to sports of national interest.

The time frames are also important from the perspective of not getting in the way of agreements currently in place with rights holders which are exclusive to one or other broadcaster. This would require:

(a) negotiating on the phasing out period of exclusivity and (b) a phase-in period where the provisions of Section 30(7) of the Broadcast Act could become operative. This would become a significant part of any enquiry in relation to exclusivity.

A further legal difficulty posed by this concept is that the SABC has a huge local content requirement to deliver. Sport is not included in these local content calculations. The SABC has as recently as this year, put forward in its local content submissions to ICASA, the need to change the Act so that sport is recognised as counting towards the fulfilment of local content regulations. It is crucial that support for this contention (although there may be certain conditions) is obtained from the relevant Ministries. SABC seeks the support and assistance of the Honourable Members in this matter.

Finally, it is important to note that the SABC is not unaware of the sensitivities of matters relating to competition legislation and the new jurisprudence evolving in South Africa in that regard. It is not and has never been the intention of the SABC to try to steamroll our competitors, it is of the utmost significance that our public service mandate be seen as a priority, whilst aspects of competitiveness need to be considered but not over cautiously.

COMMERCIAL IMPERATIVES
The commercial imperatives in broadcasting sport, revolves around the cost of the rights and the production expenses balanced against the revenues and audiences generated. In addition for the SABC the public mandate obligation it has to carry which no other broadcaster has.

Given the significant commercial interests at stake in the broadcast of national sporting events, commercial broadcasters are willing to invest large amounts of cash in their efforts to outbid the SABC. In these circumstances, the operation of the free market solely undermines the intention of the Broadcasting Act and, indeed, the national interest, as the majority of South Africans are denied access to many popular sporting events.

These commercial imperatives are obviously of significance. What the regulations will have to do and what the public hearings will seek to unpack is the extent to which:

1 Commercial imperatives should play a part;

2 Aspects of commercial competition which should be allowed to exist or not;

3 The commercial feasibility of broadcasting sports of national interest should or should not be subsidised;

4 How the competing interest of broadcasters in their attempts to reach audiences, gain advertisers and generate revenue should impact upon the essential thrust and intention of Section 30(7).

As sport becomes big business costs escalate for all parties. For television and radio broadcasters the costs of production and rights fees escalate continually. The reason for the obvious escalation in rights fees is that personalities involved in sport are becoming more conscious of their value and the costs of putting teams and moving them around for umbrella organisations is becoming prohibitive. Realising the value of their properties and the "national interest" that those properties engender, the rights fees escalate on an ongoing basis.

These rights belong to sport organisations. It is they primarily who are responsible in deciding which rights are offered to whom at what price. This escalation of rights by the owners needs to be addressed as well when dealing with this issue of events of national interest and SABC's mandate. As if this is not enough broadcaster have also to contend with independent rights brokers who further push the price up. The demise of ISL is a direct result of this and the disproportionate rights increase. By way of example the increases being asked for the next Rugby World Cup is about 71% and for the Football World Cup is about 1000%. If one considers the currency fluctuations as well these increases become even more exorbitant.

In so far as production is concerned it is much cheaper to take a live feed from foreign country than to produce ones own sport content. By way of example to produce a Bafana Bafana match costs about R300 000 if in Johannesburg and about R500 000 in Port Elizabeth compared to about R85 000 for the Italy match. Added to this is the expectation from rights owners and of course our audiences to put on air international quality product. The strain on ones resources to produce local sport is obvious. No wonder the preference by other broadcasters for foreign content predominantly, which is also attractive to advertises and this can be used to build a nice war chest come bidding time. In addition SABC is seen as training ground for talent in the industry by the other broadcasters as they continuously poach the good talent without investing in its development. The net effect is increasing production costs. The SABC's direct spend on sport is of the order of R280m per annum of which about 65% is on local sport. In addition the SABC spends R633m per annum on local content programming (this amount excludes the money spent on sport). On the other side the income from licence fees is about R300m per annum. Obviously SABC invests and values more local sport than foreign sport content.

As already indicated about 70% of SABC's revenue derives from advertising and sponsorship. As can be attested by our colleagues, in so far as revenues are concerned these are declining due to the economic climate as well as the legacy of discrimination of certain sports and audiences by media buyers. Thus whilst rights fees, production fees and viewer figures increase, there is not a concomitant increase in advertising revenue generated. SABC is finding more and more that the broadcast of sport is a commercially challenging exercise however it will do everything in its power to make this viable.

STRATEGIC CONSIDERATION
The SABC is required by the Act to include in its programming not only national sports but also development and minority sport. Obviously minority and developmental sport on their own provide no commercial attraction. It then becomes imperative that SABC leverage the commercially viable events to cross subsidise these. If the commercial broadcasters and rights owners keep on increasing the rights fee hurdle this becomes an impossibility to afford. Thus making it difficult for the SABC to carry it's mandated effectively.

SABC's further contends that when dealing with these events, this is in main about live broadcast and not the so-called delayed live broadcast. The public's main interest is when the event is actually happening not at a future time when the results are known. In addition advertises and sponsors have limited interest in recorded sport events. It is a reality that the private sector will spend the majority of their resources in media around such live events and audiences enjoy the immediacy of the action. This we say from experience. Thus discussion around events of National Interest should in main, focus on live broadcast of such events to the majority of South Africans.

As a starting point the SABC believes these events at least fall into the following categories

1. International events where S.A. teams are involved. 2. International events where more than one team from S.A are involved. 3. World Championship title events where S.A. athletes are involved 4. Quarter finals, Semi Finals and Finals of National Cup Competitions and National Leagues.

All of the above should be irrespective whether its inside or outside South Africa.

CONCLUSION
In conclusion Honourable Madame Chair let us recap the salient aspects of our presentation:

* The cost of broadcasting sport is prohibitive. However, as far as our public service mandate is concerned and, even when part of the SABC is commercialised, sport is an important part of our profile, character and obligation.

* If sport were to count towards discharging our local content obligations, this would be of great assistance.

* The SABC is open to the possibility of sharing costs with other broadcasters to make sport viable for viewing by the majority of South Africans based on the commercial imperatives and SABC's mandate responsibilities.

* Most important to the SABC is the notion of universal access. If subscription-broadcasting services are allowed to acquire exclusive rights to broadcast sports of national interest, then it is obvious that those who cannot afford these subscription fees cannot watch the sport. It is of no assistance to anyone to even talk about the solution of "open time" or SABC being granted delayed rights to allow its viewers to watch matches hours or even days after they have taken place. This is not even a matter of debate.

* The SABC is committed to fulfill the spirit and letter of the Broadcast Act No4 of 1999 both in terms of Events of national interest and fulfilling its mandate.

It is for these reasons, the SABC implores this portfolio committee to encourage ICASA to begin this process as soon as is reasonably possible to ensure that sport is open and on the agenda for all South Africans.

Honourable Madame Chair and Honourable Members the SABC must not be seen as if it is seeking any special favours but is merely stating the facts as well as seeking a fair and equitable dispensation. The fact is SABC is South Africa's only public broadcaster and has a public obligation to deliver sport of national interest to the people of this country.

We accept competition but let us all compete in an equitable environment.

Handicapping in sport to level the playing fields is an accepted norm.

Thank You