SABC-MultiChoice deal: Were old shows worth R533m?

2015-10-05 14:11

Was the deal that saw the sale of popular television shows from the SABC’s archive more than just a content-licensing agreement? Was it a merger between MultiChoice and the SABC – one that saw the public broadcaster sell the country’s “crown jewels” for R533 million? 

That’s what the Competition Tribunal has to decide after a hearing in Pretoria this week. 

If the tribunal is to believe those who brought the application – media house Caxton, SOS Coalition and Media Monitoring Africa – the contract results in MultiChoice in effect capturing the SABC’s archive when the broadcasting sector needs competition. 

But if MultiChoice is to be believed, the R533 million contract, paid over five years, is a “very small transaction” and the entertainment channel that the SABC is supplying to MultiChoice is “modest” and “unlikely to result in an increase in subscriber base” for the company. 

The contract at the heart of the dispute was signed by MultiChoice and the SABC in July 2013 and was made public later that year when leaked to the media. 

It saw the SABC agreeing to supply two new channels to MultiChoice: a 24-hour news channel and an entertainment channel called SABC Encore, which pulls popular shows from the public broadcaster’s archive for a nostalgic glimpse at the country’s broadcasting past. 

Both channels have since launched on MultiChoice’s DStv platform and the SABC is expected to carry both as part of its offering once digital terrestrial television (DTT) has been launched. However, SABC Encore will be running 60 days behind MulticChoice on the SABC DTT offering. 

The contract has been heavily criticised by industry players and civil society, which argue that the deal is anticompetitive. But the SABC and MultiChoice have vigorously defended it as a “run-of-the-mill” channel-supply agreement. 

Representing the applicants, Advocate Steven Budlender told the tribunal on Wednesday that competition in the broadcasting sector was crucial right now because of the roll-out of DTT. He argued that this was a “watershed moment” in broadcasting, that the contract was “deeply unusual” and that the archive material that made up the entertainment channel had “considerable value”. 

He also argued that the contract was all about securing local content for poorer viewers who were increasingly being drawn to MultiChoice through their lower-priced bouquets. He added that not only did the contract give MultiChoice access to the two channels, it gave it access to the SABC’s three existing channels and any future channels it launched on the DTT platform. 

SABC’s three free-to-air channels are among DStv’s most popular. Budlender said that MultiChoice wanted to increase its market share through the contract and prevent rivals from increasing theirs. 

But MultiChoice’s lawyer, Advocate David Unterhalter, argued that the contract did not meet the test for a merger and should be dismissed. He said MultiChoice was not securing the SABC archive with the contract, but merely a channel created from a small percentage of it. He argued that if the contract represented a merger, then every time a contract was signed to procure content – or a channel of content – it would mean a merger had taken place. 

Unterhalter also argued that MultiChoice would not gain significant market share because of the procurement of the channels. This led tribunal chairperson Norman Manoim to ask why MultiChoice was paying so much for them. 

In response, Unterhalter argued that it was not a large amount of money and was not out of the ordinary. He described the contract as a “very small transaction” and SABC Encore as a “modest channel”. 

The tribunal panel questioned Unterhalter on various clauses within the contract, especially those obliging the SABC to consult MultiChoice before it could take various decisions. These include a clause stipulating that the SABC consult MultiChoice before it made available “broadcasts of programmes that report on special and significant events of national importance occurring in South Africa”. 

Unterhalter argued that MultiChoice had no veto on the SABC sharing such content and that the clause was merely a relaxation of exclusivity. 

Representing the SABC, Advocate Rafik Bhana argued that the applicants bypassed the Competition Commission in taking their case straight to the Competition Tribunal and that the case be dismissed with costs. 

He said the applicant’s offer of alternative relief, which would allow the tribunal to send the matter back to the Competition Commission for investigation, was a ploy to get “another bite of the cherry”. 

Advocate Gilbert Marcus, also representing the applicants, said the Competition Commission had been aware of the contract since April 2014 when the Independent Communications Authority of SA asked it to look into it, a request the authority subsequently withdrew. 

Marcus argued that it was “remarkable” that no “alarms bells” had rung for the Competition Commission when presented with the contract last year.

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