Lawyers duel over SABC, MultiChoice deal - TechCentral

Lawyers duel over SABC, MultiChoice deal

TV-640

The Competition Tribunal heard on Wednesday that pay-television operator MultiChoice took control of valuable assets of the SABC and influenced a key SABC policy materially, through an agreement that only became public after somebody leaked it.

Steven Budlender, acting for printing and publishing group Caxton, asked the tribunal to find that the agreement gave rise to a merger between MultiChoice and the SABC.

The other applicants are Media Monitoring Africa and the SOS Support Public Broadcasting Coalition.

If the tribunal does find that a merger occurred, the parties would be in breach of their duties to notify the Competition Commission of it and an investigation by the commission may ensue to determine the anticompetitive effects. If it is found to have a negative effect on competition, approval for such a merger may be denied and the agreement would then be set aside.

The current application is seemingly a gateway procedure aimed at nullifying the MultiChoice/SABC agreement that is already two years into its five-year duration.

The agreement, concluded on 3 July 2013, and amended twice in 2014, provides for an exclusive SABC entertainment channel and a 24-hour SABC news channel to be broadcast by MultiChoice as part of its paid offering. MultiChoice will pay the SABC R100m/year, increasing by 5%/year as well as an additional R35m/year for the entertainment channel. The SABC will also sell advertising and sponsorships on the channels and receive the revenue from these sales.

The SABC is precluded from creating or broadcasting another SABC-branded 24-hour channel and from authorising other broadcasters to broadcast the channel broadcast by MultiChoice, or parts of it. The entertainment channel will contain content from the SABC archives and MultiChoice has to approve the content. The SABC is precluded from distributing or authorising any other party to distribute the channel or any part of it or to distribute a similar channel.

The SABC grants MultiChoice the nonexclusive right to distribute the SABC’s free-to-air channels on its platform. These are SABC 1, 2 and 3. The SABC further gives an undertaking to distribute its free-to-air channels in a nonencrypted format, so that viewers with M-Net set-top boxes will be able to view it.

Budlender characterised the agreement as “extraordinary” and “deeply unusual”.

He said the SABC archive, an asset of considerable value, was effectively transferred to MultiChoice. This constitutes the transfer of productive capacity, as the SABC is precluded from packaging its own entertainment material for use by itself or other parties. He said the most valuable content will be used on the MultiChoice channel and the value will diminish every time it is viewed.

Budlender said that although the two parties are competitors, the SABC is obliged to give MultiChoice three months’ advance sight of the programming on all its channels.

SABC-640

The agreement improves MultiChoice’s market position in the upstream and downstream markets, he said.

He said the SABC was once in favour of encryption once digital terrestrial television starts. However, in the agreement it gives an undertaking not to encrypt, which favours MultiChoice. Following the agreement, the SABC changed its policy on encryption, he said.

Budlender said the encryption policy is crucial and determines the way the SABC will deliver its content to the public. The TV industry is at a watershed moment with the imminent implementation of digital broadcasting and encryption is currently the subject of litigation. If the SABC should in these conditions change its position on encryption, MultiChoice will be entitled to cancel the agreement with severe penalties for the SABC.

David Unterhalter SC for MultiChoice said Caxton applied the wrong test to determine whether a merger occurred. He said the correct legal test is whether a business or part of a business was transferred, instead of rights to broadcast in an ordinary licensing agreement, as in this case.

He said to determine whether a business or part of a business was transferred, it should be determined whether the asset — in this case the SABC archive — is a going concern. This can be assessed by revenue, market share or productive capacity.

In this case, he said, it was not a business or part of a business that was transferred, but rather the output of productive capacity (the archive).

Unterhalter said only about 1% of the archive content will be used on the MultiChoice channel and there is no spill-over effect on the whole archive.

He said the SABC’s encryption policy is only one “in a huge range of policies” of the public broadcaster. MultiChoice’s influence over this policy cannot be equated to that of a majority shareholder over a board or a board over a company, he said.

He also denied any causal link between the agreement and the determination on the SABC encryption policy. In fact, the change in policy to favour nonencryption preceded the agreement, he said.

Rafik Bhana SC for the SABC questioned the tribunal’s jurisdiction and said the application should be struck down since the applicants are trying to bypass the commission. He said the structure of the Competition Act is such that parties should approach the commission first, before coming to the tribunal.

The Competition Commission refrained from filing any arguments since the matter may be referred to it for investigation.

The tribunal will announce its ruling in due course.

  • This article was first published on Moneyweb and is republished here with permission

11 Comments

  1. Vusumuzi Sibiya on

    >>The agreement, concluded on 3 July 2013, and amended twice in 2014, provides for an exclusive SABC entertainment channel and a 24-hour SABC news channel to be broadcast by MultiChoice as part of its paid offering. MultiChoice will pay the SABC R100m/year, increasing by 5%/year as well as an additional R35m/year for the entertainment channel. The SABC will also sell advertising and sponsorships on the channels and receive the revenue from these sales.

    When PSL soccer went the way of MultiChoice, it seemed that it was the worse thing ever to happen to the SABC; but as is turned out ultimately – it dramatically improved things for the PSL turning it into one of the leading leagues worldwide… of-course there’s the issue of now filling the stadiums with spectators but that’s an area where SABC radio and others can capitalize on – so job well done to MultiChoice.

    SABC has tried on countless occasions to run a 24/7 news channel successfully on their own given the numerous resources they have at their disposal; and the results have always been hopelessly pathetic – but now, thanks to Multichoice, the potential of what can be achieved by the public broadcaster is being realized – so once again, job well done to MultiChoice.

    These pathetic Caxton LOSERS as well as all their friends had no one stopping them from coming up with a deal of their own with the public broadcaster that would be able to see the potential of the resources available there being effectively managed to deliver successfully on a 24/7 news and leverage the SABC archives profitably… you Snooze you LOOSE!! and that’s just how it works on this planet.

  2. Public Broadcaster on

    Mr Sibiya. I’ve always enjoyed and respected your posts. However, you need to consider the following points:
    1. The SABC is not private company that can enter into commercial agreements with private commercial enterprises as it deems fit – the SABC is a public company that you & I ‘directly’ funds through the TV License regime and/or through the so-called ‘Government bail-outs’ when the corporation’s finances are in distress. At the minimum, the public needs to be appraised of the commercial transactions that the SABC intends to enter into;
    2. Your conclusion that the SABC was justified in signing this commercial deal with MultiChoise on the basis of a ‘win-win’ business imperatives is naive, misplaced and lacks any basic understanding of the digital content distribution market. For example:
    2.1 The SABC has DTT Spectrum capacity to provide up to 14 channels on Mux 1. The SABC is now telling South African’s that it will only have 5 Digital channels – ostensibly, on the basis of affordability to produce more channels. With more than 15 years of archived programming, is it really comprehensive that the SABC cannot produce, for example, a Drama Channel, Comedy Channel, Sports Classics Channel, Kids Channel, Documentary Channel – endlessly!! – In principle, the commercial agreement with MultiChoice prevents the SABC from providing these channels;
    2. Any practitioner that works in the television business will tell you that the business model is premised on creating memorable content that has the so-called ‘long-tail’ appeal with audiences. To date, we have South Africans complaining about the number of repeats on DStv channels – as DSTV repeatedly explains, this is the nature of multichannel broadcasting
    3. In essence, the majority of South Africans would be grateful to enjoy and reminisce on the old SABC content that they’ve paid for through License Fees and ‘bail-out taxes’ in recent years. Your suggestion that the SABC Multichoice deal is purely a ‘commercial transaction’ is tragic and unfortunate, especially for a broadcasting practitioner with years of experience in the industry.

    In the final analysis, we all have our priorities.
    One hope that your’s will be closer to the average South African content consumer in the near future.

  3. Vusumuzi Sibiya on

    >>the SABC is a public company that you & I ‘directly’ funds through the TV License regime and/or through the so-called ‘Government bail-outs’ when the corporation’s finances are in distress.

    Precisely… and if I had to be running the SABC, I would make decisions that benefit the bottom-line; and perhaps those at the public broadcaster ought to be grateful that someone like me isn’t going to be in that position because I would begin immediately with losing, no less than a third of the staff, with a short-term objective of getting to a point where there’s just 25% of the current staff complement.

    >>The SABC has DTT Spectrum capacity to provide up to 14 channels on Mux 1. The SABC is now telling South African’s that it will only have 5 Digital channels – ostensibly, on the basis of affordability to produce more channels.

    MultiChoice is having far more than 14 channels on the DStv platform and perhaps when the SABC reduces it’s staff complement to the same size as that of MultiChoice, it would be able to afford having the 18 channels that it had said would be available on DTT.

    >>>>the SABC is a public company

    …that does not mean that the SABC shouldn’t be run and operated just like any other business that sets out to make a profit – when the SABC can model its business around the success that has created a phenomenal global giant of a private company like MultiChoice; then only will we ALL benefit from our tax money that is funding the public broadcaster.

  4. CharlieTango on

    All MultiChoice has done here is identify a gap and “persuade” the right individuals for their own purposes. What’s new?.

  5. Vusumuzi Sibiya on

    Just how many people have benefited from MultiChoice’s own purposes for being in business…???

    …aside from the PSL, SARU, SABC, etc; their BBBEE share-scheme as well the numerous other off-spins that are benefiting business in the broadcast industry are directly as a result of…

    >>All MultiChoice has done here is identify a gap and “persuade” the right individuals for their own purposes.

    Why can’t the other LOSERS learn from this example…???

  6. Mihlanga Mhlanga on

    The point here is that SABC is a public entity, which ought not to promote or entrench monopoly in anyway; Most South Africans and the regulators in the broadcasting space are concerned about how ICASA has allowed MultiChoice to grow to the extent they are today where their dominance has become a barrier of entry for new players and thus removing the potential benefit of competition for the consumer.

    The disputed agreement has tied down the content under the control of MultiChoice, which means that the SABC fails to create more channels on the basis that they have actually sold their soul for the duration of the contract, which might be having an extension clause.

    The reduction of costs from any division cannot override the conditions of the contract.

  7. Vusumuzi Sibiya on

    >>which means that the SABC fails to create more channels on the basis that they have actually sold their soul for the duration of the contract, which might be having an extension clause.

    “…sold their soul” Please – the duration of the contract is 5years; and what has already come out of this has been beneficial in showing how a 24/7 news channel can be run; and that huge SABC archive is now being digitized and there’s also going to be learnings on how to leverage it profitably.

    The SABC is no angel BTW… plenty of people that have done business with that entity can attest to that; and how quickly they’ll move to work things on their own and sideline you once you’ve brought them a solution to a problem or new idea and proven how it can be monetized.

    That’s the risk that MultiChoice has taken and having been in this industry for many year’s – I can most definitely say that its the best thing to have happened for the SABC, particularly given all the monies that have been wasted in the past with attempts to run a 24/7 news channel.

  8. Cloudy with a chance of a profitable SABC.

    I suppose that Caxton will fund the future funding shortfalls of SABC as a result of a loss of these revenues. It would be opportune for SABC to claim damages if this happens.

    The SABC management are trying to beef up revenues and should be given some credit for it.

    The BBC and many other international state owned channels sell their broadcast content to platforms all over the globe, this is how they sustain themselves financially, maybe the idiots who are pushing this matter should stick to selling knock and drops and not interfere with things they are totally clueless about.

    The SABC should not be used as a tool to settle Naspers and Caxton scores. This is shameless and damaging to the Caxton brand.

  9. Dstv should have never been allowed to start operations without 2 or 3 competitors from the early onset.

  10. There were no losers, or even competitors when M net and Dstv started.

    Naspers should never, ever have been allowed to start their ventures without immediate competition from at least two companies offering the same services.

    Read : http://www. dailymaverick. co. za/opinionista/2015-10-06-sabc-multichoice-deal-is-effectively-a-merger/#.VhTdd_mqqko

    Remove the dots after the spaces.

    As a spineless, gutless supporter of dominant organisations like the misruling party and the near monopoly of Dstv, you will never understand the issue of a bit more level ground for competitors to the benefit of consumers and the country as a whole.
    Power corrupts, absolute power always totally corrupts.

  11. Vusumuzi Sibiya on

    >>As a spineless, gutless supporter of dominant organisations like the misruling party and the near monopoly of Dstv, you will never understand the issue of a bit more level ground for competitors to the benefit of consumers and the country as a whole.

    You forgot to mention Google… and that would’ve helped to highlight exactly how things work on this planet.

    Once upon a time…

    “There was a dominant search engine giant called Yahoo”

    …and now the only reminder of what they once were are the same two “oo”s’ in their name that can be found in the dominating G”oo”gle.

    Hahaha… if you are going to be a bunch “of something” – you’d best choose to be a bunch of “Winners”, just ask our sports minister from the “Ruling Party” LOL

© 2009 – 2020 NewsCentral Media