SABC: Money-shredding black hole begs ICASA for help

THE SABC were the headline act of the week, the chief protagonists. Sitting behind them, their adversaries, and chief antagonists, Mutlichoice, were quietly taking notes. Meanwhile, ICASA were trying to referee a hearing that could take the entire process of amending the broadcasting bill back to the drawing board. One thing was clear though: sports broadcasting rights have burnt a hole bigger than the one found in Kimberley into their fiscal budget. But that is not SuperSport’s fault.

Kwese TV opened Friday’s proceedings but in all honesty everyone was at the African Pride Country Lodge in Irene to hear from the SABC and its chief nemesis SuperSport. Kwese only acquired their license to trade in March, and had yet to dip into the hotly contested sports rights market in the country. Moreover, they came with a cloud of suspicion that their funds had run dry and that they would not be able to afford said rights anyway.

ICASA did their best to indulge them professionally but once they were out the way, nice and early in the morning session, the real show began.

The SABC did not disappoint. Pleading poverty, they came and laid bare their plight in front of the communications regulator, ICASA, in an attempt to persuade them to follow through on the controversial Draft Sports Broadcasting Amendment Regulations (2018).

They blamed their loss-making corporation (to the tune of half a billion per annum) on sports licensing fees, which they claimed bled them dry. They accused federations -– presumably the likes of SA Rugby, SAFA, the PSL and Cricket SA – of basically thumb-sucking the value of their sports rights.

At this juncture, one could not help but remember the SA Football Association presentation made by CEO Russell Paul, who said there was an impasse with the public broadcaster regarding national football team rights because the SABC offered R100-million less per year for Bafana Bafana games than they’d been paying over the last six years.

The previous deal meant SAFA got R110-million per year but SABC were not prepared to part with more than R10-million. SAFA said it was an insult and stormed out the negotiating boardroom (metaphorically).

“From the outset, the SABC would like to say it appreciates and values the ICASA process of reviewing the sports regulations regarding broadcasting services,” said SABC Group CEO Madoda Mxakwe.

“As you know the regulations were last reviewed and published in 2010 and owing to the rapidly evolving market in the broadcasting environment, the regulations have lost their relevance.

“The SABC has, over the years, carried the burden of broadcasting sports events, under very difficult financial circumstances and regulatory requirements. While the focus of the public broadcaster is understandable, it is factually incorrect to state that the SABC should carry this burden – when the public broadcaster is not mentioned directly in these regulations.

“From a financial sustainability point of view, and cost implications perspective, the acquiring of sports broadcast rights places a huge burden on the SABC. However, the existing and the proposed regulations do not deal with the very essential issues around commercialisation, pricing as well as the market related conditions with regard to the acquisition and sub licensing of rights for national sporting events.

“The SABC is currently not receiving any public or government funding for sports and this situation has led to the SABC having to utilise cash from its own operations to fund sports and the public mandate in general.

“As a result the SABC is always faced with exorbitant price offerings, which compromises its financial sustainability. It has been far beyond inflation.”

Inside the packed conference room, as the SABC aired its financial state on the overhead projectors, it felt like being inside the emergency room of a public hospital and seeing the horror of it all. The SABC showed that:

• In the 2014/15 financial year they spent R813-million on sports expenses (rights and production), of which they got back R172-million turnover, totaling an eye-watering R641-million.
• In 2015/16 it spent R882-million and got R168-million in return. R713-million, shredded.
• In 2016/17 they spent R863-million and got back R199-million – a R663-million loss.

You get the picture. The SABC may as well repo the working population’s cheque cards, withdraw all the money from the poor public’s bank accounts like a payday lender and burn the R200 bills in their Auckland Park parking lot. They would sweat less in destroying the tax-payer’s funds.

“This past fiscal year, from 1st April 2018 to 31st March 2019, the SABC spent R550-million on sports rights and the broadcasting of sports events. The revenue generated from these events, for the same period, was a mere R143-million,” said Mxakwe.

“This represents a negative return on investment of 74-percent. In the past fiscal, the SABC has spent 20-percent of its total R7-billion expenditure on sports rights. And as you can imagine, that is not sustainable for us.

“Over the last five years, a total of R3.7-billion was spent on sports, with revenue and income from these events of a lousy R148-million, with losses amounting to R3.6-billion.

“The SABC cannot or sustain this status quo of incurring expenditure for sports rights and production, with little or no return on investment.

“The SABC’s total losses stand at about R543-million for the past fiscal year and about R500-million of that is attributed to sports rights. Without that burden, the SABC would have been able to break even.

“It is disappointing that after 25 years of democracy we still have not been able to transform the broadcasting sector to ensure that the poorest of South Africans can freely access prime sports.”

It was hard to feel sympathy. What they could not explain, even though the question was posed by New Frame scribe Musawenkosi Cabe, was how was it possible that they could not market the Bafana Bafana games well enough to get advertising that would help them break even?

Bafana boasted an average viewership of 3.8-million people each time they played, and can hit 5-million eye-balls at their peak. Somehow the SABC were able to turn these staggering, sales and marketing nuggets into loss-making figures.

To put the nozzle firmly on the top of their own foot, SABC’s football production costs were also three times higher than other broadcasters – at least that’s what SAFA alleged and questioned.

“Most of the sports that we air is reliant on the type of sponsorship that we get and the type of revenue that we make from what we broadcast,” the SABC said in a badly inadequate attempt at an answer.

“In most cases we’ve not made profits on that because we’ve broadcast in the public interest and that has shown in the losses we’ve made in the last three years. The elephant in the room is that, in the last three years, there’s not been performance in Bafana Bafana but there has been performance on Banyana Banyana.

“So, even if you get the rights, it becomes very difficult to find a sponsor.”

A point of correction – in the last three of four years Bafana narrowly missed out on World Cup qualification and qualified for the looming Africa Cup of Nations in Egypt. Banyana Banyana made the the final of the Women's Afcon, grants, but it's not as it the SABC showed any Banyana games either. They were offered free national women's team games last year and didn't flight a single one – as we heard from Paul – even though the ladies are representing South Africa at the Women's World Cup in France this month.

Perhaps noticing that the SABC were in danger of scoring monumental own goals, the parties agreed to take some of the confidential matters off air, with the SABC given two weeks to provide some answers.

One tangle they got into was the answer given as to why the SABC never aired any live Netball matches, even though they had the rights for free up until 2005 and they still didn’t use them when they paid for them between 2005 and 2008.

“Netball is one of the minority sports. Yes it is listed (in Category A and B of the draft regulations) but in terms of its commercial viability it didn’t quite work for us. We could not get a return on it,” they said.

What they wanted ICASA to do for them, though, was to retain the exclusivity label attached to sports broadcasting rights, with the caveat that the rights ought to be unbundled and sold to pay-television and FTA in separate bundles. Those with the pay-television rights would hold exclusive pay-channel broadcasting privileges and those with FTA would hold FTA privileges.

“The SABC believes the unbundling of sports rights may be one of the mechanisms where anti-competitive pricing measures may be dealt with effectively. It is unfair for dominant players to acquire rights and sub license them to other platforms without any regulated criteria,” said Mxakwe.

SuperSport came to the table and basically said “tough shit”. Multichoice CEO Calvo Mawela, flanked by three advocates, including Brandon Foot, their Group General Counsel, was not in the mood to play. He was curt, straight-forward and direct.

To be fair, he had to be. His organisation’s subsidiary was Accused No 1. The crime? Its stinking money was allegedly pricing “sports of national interest” out of reach for ordinary South Africans.

“We believe the current regulations (2010) are fair, well-balanced and they should not be amended,” said Mawela.

“And we are deeply concerned about the approach taken in the draft regulations. The calls for radical change to the current regulations, we believe, are ill-advised. There is no compelling rationale for changes.

“If problems exist, it is our view, they exist outside of this regulations in terms of Section 60 (1) [of the Electronic Communications Act]. Our core message is that, don’t break what is working, let’s work together to further build SA sport.”

Following hot on the trail of SA Rugby, who threw the gauntlet down on Tuesday, as well as the Premier Soccer League, SuperSport prepared a legal argument that challenged ICASA’s constitutional powers and reasoning behind the changes. It was a popular tactic.

All were hoping to subdue the regulator into retreating into its shell but signs so far are that they only succeeded in strengthening ICASA’s resolve. There will be changes to the regulations – if not now, then later.

A terse exchange between key ICASA panel member and policy maker Violet Molete and Mawela gave away signs of what’s possibly to come in the months or even years before the changes are made. It was the exchange of the week, it summed up the reason why we were all in Irene and it had all of us on the edge of our seats.

Madam Molete started it: “The reason most federations went to SuperSport was because they were not getting joy from the SABC. I’m a sports federation [hypothetically], I need to make money, I need to pay my staff and my players, I go to the SABC and they are having financial problems. Surely I’ll come to Multichoice.

“And if Multichoice gives me money, ICASA comes out with the regulations, which I feel are going to be detrimental to my livelihood, of course I’ll fight. I’ll fight ICASA and say don’t change the regulations. But the reality is that the reason we are coming up with these regulations is precisely for public interest.

“Why should I pay R900 to be able to watch sports of national interest? If the SABC had money, I’m not so sure we would be having this discussion today. Let’s take out the commercial interest and ask what we are doing for the general public and the majority of South Africans.”

Mawela finished it: “The panel member is touching on an important aspect of this discussion. All these issues that are being raised are not part of Section 60 (1). The fact that the SABC doesn’t have money, has no base in Section 60 (1). And we can’t solve the SABC’s financial problems by coming to Section 60 (1) and imposing restrictions on broadcasters and sports federations.

“That’s why we are cautioning the authority: do not follow through on the financial problems that other people are facing and try to resolve them.”

SIBUSISO MJIKELISO

@sbu_mjikeliso on twitter.

ICASA’s panel is chaired by Palesa Kadi.

Deputy Chair is Nomonde Gongxeka-Seopa. 

The rest of the panel consists of the following minds: Refiloe Motseoneng, Zola Yeye, Mamedupe Kgatshe, Onkarabile Mokoena, Ashwin Fairbiarn, Ehi Enabor, Bethuel Makola and Violet Molete.

Again, I am writing in my personal capacity as a writer. I am writing merely to inform the public on the developments that could have a major impact on sport and sports broadcasting. Call it #CountryDuty if you like. If you missed my day one wrap of Monday's proceedings, click here, if you missed Tuesday's wrap click here, and the PSL's DAY 3 report is here, while SAFA's Day 4 report is here.

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