What You See is What You Get

by Sugar, Alan

  While they were still laughing, I decided to tell them another joke. I pointed out that none of the clubs had held on to any of the money they’d got from the first BSkyB deal to strengthen their balance sheets. A lot of them were still borrowing heavily and had just jumped on the bandwagon of buying players and overpaying them – based on the prune-juice effect.

  ‘The prune-juice effect, Alan? What do you mean by that?’

  ‘Well, you know what happens if you drink too much prune juice – it runs straight through your body. That’s exactly what’s going on here. The more money the TV company is going to give you, the more money you’re going to spend on players. You are not repaying your debts or modernising your stadiums, you’re just paying more for transfers and salaries.’

  ‘So what’s your suggestion, then?’

  ‘My suggestion is that if, hypothetically, we got a hundred and fifty million a year, the Premier League should retain, say, fifty million each year and put it into a special trust that’s governed by experienced people from the football industry, a trust that can be drawn upon to pay for things such as ground improvements, academy development, training grounds and so on. The trust would ensure there’d be no dodgy dealing – clubs would be prevented from drawing on their share of the trust under the guise of “ground improvements” when really it was to be spent on players.’

  You’d have thought I was a cabaret act, some sort of stand-up comedian. This suggestion brought another roar of laughter. I told them all, ‘You simply don’t grasp the fact that if even we did get a hundred and fifty million a year, I’d have a bet with every single one of you that by the end the year, none of your clubs would have anything left in their pockets. We are hiking up the prices of players ourselves by competing with each other using the large sums available to us.’

  The acquisition of Klinsmann, Dumitrescu and Popescu seemed to have kick-started a new revolution of foreign players joining the Premier League. In the past, players came from the local community, trained in the youth academies and had a real allegiance to the club. I reminded the meeting about this and how we were now being flooded by foreigners coming here for the money, simply because we were the richest league around. We were now attracting these Carlos Kickaballs who had no history with our clubs and would go anywhere for money. The Carlos Kickaball remark got more laughter. To this day it is quoted and remains in the football dictionary.

  The trouble with me is, I get too excited when I’m explaining something. I come across as too overpowering and this kind of winds people up and puts them in defensive mode. To me, it was clear the industry was heading for disaster. Piles of money would be given to the clubs, some of which were run irresponsibly by people who were no more than glorified fans, the last people on earth you should put in charge of finances.

  I also failed to get my point across when arguing that no other broadcaster could compete with BSkyB. Their model was based upon Pay TV, whereas broadcasters such as the BBC and ITV were funded – in the BBC’s case by the licence fee, in ITV’s by advertising. I told the meeting that the BBC and ITV would never come up with a massive amount of money. If, hypothetically, ITV were to bid for the forty live games, each game would have a maximum of twelve minutes of advertising time (advertising time slots were regulated in those days and the pre-programme sponsor we now see on ITV was not allowed). The likes of Coca-Cola, Gillette or Nike would pay no more than £15,000–20,000 for a thirty-second slot. It was simple maths: 40 games x 12 minutes per game = 480 minutes (or 960 thirty-second slots). At £20,000 per slot – assuming we were only proposing to allow forty games to be broadcast per year – the total advertising revenue for the channel would only come to £19.2m.

  Unfortunately, this logic fell on deaf ears and I got some dumb looks from certain chairmen. A couple of the shrewder ones caught on to what I was saying, in particular Ken Bates and Sam Hammam. But the others just dug their heels in and argued because they didn’t understand what I was talking about. David Dein and Arsenal were still banging on about allowing ITV and others to pitch. My maths lesson had been a waste of time and we agreed that the next TV deal would be decided at the annual summer meeting, to be held in Coventry, with an array of broadcasters invited to pitch their propositions to the chairmen.

  At the Coventry meeting, a fashion parade of broadcasters arrived. Michael Green, the head of Carlton Communications, came along with a bunch of people, saying that he’d put a consortium together and was prepared to put up a bid. As an eloquent speaker, he got the attention of some of the chairmen. Then I opened my mouth and started asking a few questions. ‘Mr Green, do you have a proposal as to how viewers will be able to watch the programmes broadcast by your consortium?’

  ‘No, no, no, don’t worry about that – we’ll be putting up a service on a satellite. That’s really a minor issue.’

  ‘Excuse me, Mr Green, that is not a minor issue. BSkyB have invested hundreds of millions of pounds putting equipment in people’s homes to enable them to watch football. Is it fair to say, Mr Green, that your consortium has no way of broadcasting at the moment?’

  ‘My technical people say there is a way that we can use the existing dishes in the market – they can be turned and tuned in to another satellite.’

  ‘No, no, Mr Green, please hold on. With all due respect, my fellow chairmen are not technically up on these issues. I have to say, on behalf of the chairmen here and the Premier League, that I am. And there is no way you can simply turn a dish in another direction, nor will you be able to use existing BSkyB equipment to collect your money. Also, Mr Green, if, for example, you were going to offer over a hundred and fifty million pounds to us, we would need to know where the money is or how you’re going to get it.’

  At this point Green lost his temper, telling me that I was only there to line BSkyB’s pockets and that I wasn’t being fair. I told him, ‘I’ve asked you some simple and reasonable questions – how are you going to broadcast the stuff? You have given us, the chairmen, no answer. You have passed the question over to your so-called technical expert who, with the greatest respect, is talking a load of rubbish. You haven’t told this meeting whether you can guarantee the money and, by the way, even if you could guarantee the money, we would be a bunch of fools to accept money from an organisation that is not actually providing a service to the public. We all agree that one of the effects of BSkyB’s coverage of football is that it has popularised the sport – all our stadiums are now full and there is an excitement about football. That has all been brought about by the tremendous job done by BSkyB. With respect, Mr Green, what you’re proposing sounds like walking two steps forward and ten steps back.’

  Green shut up at that point and the meeting was brought to a close.

  I wasn’t lining the pockets of BSkyB; I was genuinely talking with my Premier League hat on. A further meeting of the chairmen only was convened an hour or so afterwards and we finally decided to go for BSkyB’s new offer – equivalent to £150m per season. How did that come about? Well, one of the few people who took notice of me was Rick Parry. He had nothing to lose by hinting to all the broadcasters that they needed to be in the £150m ballpark.

  I tried to reiterate my idea of putting some of the money away into a trust, but this was shouted down by Chelsea’s Ken Bates and Terry Brown of West Ham. They claimed it was their money and they should be allowed to do with it what they wished.

  Sam Chisholm was delighted when I called to tell him that the meeting was over and he could pop the champagne, as they’d won the deal again. While I was talking to him, his other phone was ringing – Rick Parry was on the line, about to tell him the same thing.

  BSkyB never knew about my intervention with Michael Green. They don’t realise to this day what a pivotal moment it was. I spoke to Green afterwards and he told me that all he wanted was to get a consortium together to buy the rights, then he would sell them on to someone like BSkyB and make a profit on them. Quite a clever move, if he’d got away with it.
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  16

  A Magnificent Deal

  New Inspiration with New Amstrad

  1996–8

  ‘Mr Sugar, what is a lie?’ Peter Goldsmith demanded.

  ‘I’m sorry – a lie?’ I said weakly.

  It’s a funny thing. When you’re confronted by a barrister, all dressed up in his wig and gown, with the judge next to you as well, you tend to get nervous.

  It was July 1996, nearly six years since Amstrad had issued legal proceedings against Seagate for the duff hard disk drives they’d shipped us. The case had finally got to court and the hearing was in front of a specialist judge, experienced in technical matters. My staff had given their evidence and now it was time for me to take the stand. I’d spent the weekend reading up on all the documentation as best I could, bringing myself up to date with events that had occurred nearly eight years earlier. There were about ten thick files and it was torturous work. All I could do was scan through the stuff.

  This was the first time I’d given evidence in a court case. As you can imagine, I was anxious and this was not helped by the fact that Seagate had employed the services of Peter Goldsmith, the same guy the FA had used in the arbitration with Spurs. He was backed up by two other barristers and a pile of solicitors. David Gold had warned me that Goldsmith was a bit of a Rottweiler – tough, tricky and hard to deal with. His opening gambit had thrown me, but I pulled myself together and decided I wasn’t going to be cowed or bullied by anyone – I would simply tell the truth.

  ‘Yes, what is a lie?’ Goldsmith persisted.

  ‘Well, a lie is when someone doesn’t tell the truth.’

  ‘Okay, Mr Sugar, do you lie?’

  ‘Well, not generally.’

  ‘Well, not generally’, he mimicked. ‘Mr Sugar, do you lie? Yes or no? Do you lie?’

  This dramatic opening question obviously caught me a bit off guard. I collected my thoughts and replied, ‘Well, there are different types of lies, aren’t there? There are serious lies and little white lies.’

  ‘Little white lies, Mr Sugar, are lies, are they not?’

  ‘Yes, they are lies.’

  ‘So you do lie then?’

  ‘Well, Mr Goldsmith, I most probably lie as much as you do, or His Honour here.’

  ‘I beg your pardon, Mr Sugar? It is very discourteous of you to suggest His Honour doesn’t tell the truth.’

  ‘I didn’t say he doesn’t tell the truth in general. Because you asked me to give you a black and white answer as to whether I lie – “yes or no” to use your words – I used the example of a little white lie compared to a serious lie, but it seems you’re not satisfied with that answer. Mr Goldsmith, do you have any children?’

  ‘Er, I beg your pardon, Mr Sugar? What does my having any children have to do with the matter we’re discussing here today? And by the way, I am the one asking the questions, not you.’

  ‘Well, I would like you to answer me, Mr Goldsmith – do you have any children, yes or no?’

  ‘Well, it so happens I do.’

  ‘Good. Well, when one of your children loses a tooth and you tell them that in the morning they’ll wake up and find a fifty pence piece under the pillow because the tooth fairy put it there – that’s a lie, Mr Goldsmith, isn’t it?’

  The courtroom started to laugh. Goldsmith had lost his point and I had put a stake in the ground that he wasn’t going to make a monkey out of me.

  He then moved on, trying to describe the technicalities of a hard disk drive and how it stores data. I could see he was bullshitting – he knew as much about the intricacies of hard disks as I did about knitting. I chose a moment to raise my eyebrows and glare at him, looking straight into his eyes as he was talking. At the same time, I smiled as if to say, ‘You are talking a load of rubbish – you don’t know what you’re talking about.’ He started to go red when he realised he was digging himself a bigger and bigger hole.

  I kept on glaring at him and he must have thought that at the end of his ramble I was going to tell him he was talking a load of rubbish. Instead, I said, ‘I assume, Mr Goldsmith, that someone has coached you on this and, to be perfectly honest, I don’t know whether what you’ve said is right or wrong because I’m not a technical person.’ I could see the judge smile. He realised both Goldsmith and I knew sweet Fanny Adams about hard disk drives.

  I was on the stand for two days. At one point, Goldsmith led me to one of the files and asked me to turn to a letter from one of our customers, P&P Micro. The letter was packed with complaints – it stated they’d received the first lot of computers and they’d failed, then they’d received the second lot of computers (after we’d fitted hard disk controllers) and they’d still failed. Finally, they’d received the third lot of computers and they were still failing.

  The point Goldsmith was trying to make was that we had alienated our customer base and had lost the market. In other words, even if we’d been making perfect computers now, we no longer had customers to sell them to. He needed to run with this argument to alleviate the claims we had on Seagate for damage to our business. He was implying that if Amstrad had been damaged by Seagate, we would need to refer to Seagate’s terms and conditions in their contract, which stated that if they shipped bad merchandise, the maximum we could claim would be the value of the merchandise. If Goldsmith were to get this point home, then even if the judge agreed that Seagate did ship us rubbish, the judgement would only be for a small amount of money – the value of the hard disk drives. We, of course, were claiming not only reimbursement for the rubbish they’d shipped, but payment for damages caused to our company and its shareholders.

  Goldsmith hadn’t realised that I’d read the documents. I remembered that P&P Micro’s letter was actually two pages long and Goldsmith had referred only to the first page. Just as he was about to move on and make his next point, I asked him to stop and look at the second page. He reminded me again that he was running the cross-examination and it was not my place to interject.

  ‘Mr Goldsmith, you have made the point that you think we had lost all our customers, is that right?’

  ‘That is exactly the point, Mr Sugar. You no longer had any customers due to the way you had alienated them.’

  ‘I see. Well, therefore I think it only fair, Your Honour, that we look at the second page of this letter and read the penultimate paragraph.’

  The judge looked at Goldsmith, then turned to me and said, ‘Please read it out, Mr Sugar.’

  It read, ‘Despite all these problems, we are still very interested in supporting Amstrad computers. As soon as you’ve solved these technical issues, would you please ensure that we are the first customer to receive them.’

  Goldsmith was very embarrassed. He’d lost his point totally, but blustered on, Ah, well, Mr Sugar, everybody wants to be the first, don’t they?’

  ‘Mr Goldsmith, you just painted a picture that no one wanted to deal with us any more. Remember the recent crisis at McDonald’s because of mad cow disease? Well, Mr Goldsmith, would you want your children to be the first to eat the newly launched hamburgers?’

  Once again, the court burst into laughter. I was starting to enjoy myself on the stand and I was getting a real feel for how these things went. Goldsmith, meanwhile, had a face like thunder.

  The case went on for about ten days, at the end of which the judge announced he would deliberate before arriving at his judgement, which would be made in several months’ time. I couldn’t quite understand why he needed so long, but David Gold explained that this was a complex case and it was quite normal for judgements to take up to nine months. The judge was a busy person, hearing many cases, and had to find the time to study his notes, the history and the documentation.

  *

  I’d taken one eye off the ball as far as Amstrad was concerned. It is one of the things I look back on and deeply regret. I have gone on record many times saying I wasted ten years of my business life in football. Not only did football disadvantage me financially (and who kn
ows what Amstrad could have achieved if I’d concentrated on it totally?), but it also took its toll on me personally. It made me a miserable sod, constantly involved in arguing and fire-fighting.

  Regrettably, I also hadn’t concentrated on Dancall under Bob Watkins’ management, but had left him on his own to get on with it. When I bought the company, I envisaged it focusing totally on the new booming GSM mobile market – they had the technology and were ready to go. I wanted Bob to do what he was best at: making sure the new GSM stuff was fully developed and getting it produced on time and at the right price. Instead, he allowed the people there to run riot with other technologies they had. There were silos of engineering in separate divisions, all filled with clever people spending a lot of money and engineering effort developing pagers for the likes of Vodafone and another wad of money developing DECT (portable fixed-line home phones). I made a big error in not being there on day one to assert my authority and make them focus on GSM only.

  Here is the bloody point. Bob spent years working side-by-side with me and knew my philosophy – forget low-price items and concentrate on high-ticket items. Simple. We don’t want to be selling audio units at £20 ex-factory and only make £5 profit; we want to sell colour PCs at £1,000 ex-factory and make £200. The writing was on the wall for pagers – they were on the way out. The billing price ex-factory was about £35, so the absolute margin per unit was slim. More to the point, it occupied a lot of our rocket-scientist engineers who were more than capable of turning their hands to GSM. The same could be said for DECT – while it was leading-edge technology in those days, it was only usable for home phones and, again, the ex-factory billing was small. A GSM phone, on the other hand, was fetching around £180 ex-factory in those days. Apart from pagers and DECT phones, Dancall did develop a couple of new GSM phones and got orders from Mercury in England and E-Plus in Germany. There was no lack of demand in those days, as the market was booming.