by Sugar, Alan
I suggested, ‘Once we’ve got the technical information, let us, at our own cost and our own risk, go ahead and develop a product. Then we’ll demonstrate it and put in an attractive price.’ I rubbed it in a bit more by reminding him that Pace had billed BSkyB for an upfront, non-refundable development fee, which we wouldn’t be doing. He couldn’t turn down my proposition – he really had nothing to lose.
The technical people at Sky were not happy bunnies. They reluctantly handed over the data to Ian, including permission to talk to the Israeli company NDS, who by now had grown from the small firm supplying smart-cards into a giant organisation developing the software for Sky+. I won’t say our relationship with NDS was bad – I think they were quite professional – but there were no favours coming from them. They were very regimented in their way of doing things. As they had limited engineering resources, they informed me they wouldn’t be able to support the development of an Amstrad PVR for several months because they were working closely with other manufacturers.
Between Ian and myself, we got this project on the road. Ian would brief me daily on the bureaucratic blocking going on with BSkyB and NDS, while I stayed on the periphery, trying to bash these obstacles out of the way. Abe Peled, the boss at NDS, was known to me and I managed to convince him to allocate some engineering people to assist us in developing the Sky+ box. From then on, from a technical point of view, we were at the races. We had the ingredients necessary to at least develop the box, but of course we had no orders. The only way we could get BSkyB’s attention was to blow the other manufacturers out of the water from a price point of view.
Pace, with their feet tucked cosily under the table, were charging some outrageous price for the Sky+ box. Ian and I (and our parts buyer) worked diligently on the bill of materials, concentrating on the high-priced core components. There were just a few of these, but they made up 80 per cent of the cost of the unit. There was the main chip, supplied by NEC, and the hard disk drive, supplied by – guess who? – our old friends Seagate.
Interestingly enough, the Seagate management had changed from those we’d locked horns with years before. And just as the new wave of Sky management wasn’t interested in my relationship with Rupert Murdoch, the same thing happened at Seagate, but in a positive way – they weren’t interested in the fact that we’d kicked their arses for $150m in the past. They were a far more professional organisation than the one we’d engaged with in the mid-eighties and the technology on hard disk drives had been perfected by now.
We got ourselves to the stage where, in the good old-fashioned Amstrad way, we had come up with an amazing bill of material. I asked Simon to find out through his cronies at BSkyB when the next tender for the Sky+ box was coming up. He tipped me the wink that it would be happening in a few weeks’ time.
Having got ourselves on the tendering list, we shoved in a blow-them-out-of-the-water price that got BSkyB’s attention – from memory, it was around £40 cheaper than Pace’s. The French company Thomson had also been taken on by BSkyB as a second supplier and we were £40 cheaper than them as well! This woke BSkyB up to the fact that they were overpaying for Sky+ boxes. Having given them this reality check, you would have thought we’d then receive a pile of orders – not so. Human nature being what it is, BSkyB’s engineering people started poking their noses into things. You can imagine what a bunch of dickheads they must have looked to their bosses when we tendered a price of £40 less than they normally paid. They had to justify themselves, so they tried to cloud the issue by saying we had not yet proved we could produce this technology to the required quality and that price was not always the criterion upon which you buy merchandise. At the same time, by some magical means, our low price had filtered back to Pace and Thomson and – surprise, surprise – they re-tendered with massive reductions.
Now, if I were Tony Ball, I’d have got hold of these Pace and Thomson people and said to them, ‘How come you can suddenly drop your price by forty pounds? What’s changed? You’ve been ripping me off, haven’t you?’ But, as I’ve said, Tony was occupied with BSkyB’s core business and left these matters in the hands of his middle management. I called Tony a couple of times, telling him he should ignore this smokescreen from his technical people. I assured him there was no rocket science in these boxes – most of the technology was coming from NDS and it either worked or it didn’t. The same software was being used in the Pace and Thomson boxes as in ours; indeed, the exact same NEC chip was being used in the Pace box.
My persistence paid off and Tony agreed to give us our first order for 200,000 Sky+ units. We were well and truly in the PVR business. As always in electronics, component prices kept coming down, the chip manufacturers became cleverer, the specification of the box became more advanced and hard disk drive capacities went up. We developed a second version of the Sky+ box which was much smaller physically, cost a lot less, looked more attractive and did five times more, spec-wise.
One thing about the BSkyB organisation is they seem to churn their CEOs quite a lot. For some reason or other, by November 2003, Tony Ball was on his way and James Murdoch, one of Rupert’s sons, came in to take over the business. James, one of the new young breed of executives, had a completely different style of management to Tony. He placed far more importance on his middle management, which meant my route to solving problems was no more. It was the end of another era.
On the occasions I tried to speak to James, he would never override any of his employees. As far as he was concerned, they made the purchasing decisions within the company. In a few of my general conversations with him, I would enquire as to the health of his father and he would politely reply, ‘Rupert is very well and sends you his best regards.’ It was James’s way of saying, ‘Yes, Sir Alan, you don’t need to remind me about how the company started; I know the story, but now we’re moving on. There’s a new wave of people here now – under my guidance – and that’s how it’s going to be, so don’t use that old trump card any more, as you’ve used it too often.’
I guess I was less useful to Sky when I left the football industry. Prior to that, I was heavily involved in all the Premier League meetings and must have been quite a good ally for them, but now I was totally out of football, I suppose they thought I was no longer an asset. That’s a realistic position as far as I am concerned. I can’t really complain because business is business and it’s human nature to want to deal with today’s issues and not look back. Anyway, from then on, it was a case of me keeping my head down and allowing Simon and Ian to be the front men as far as BSkyB was concerned.
With my concentration back on Amstrad, the upturn in business proved to me that when I put my full effort into something, there’s a good chance it’ll end up successful. History showed that when my attention was deflected by football and the crazy litigation stuff, the fortunes of Amstrad went down the pan. Having reshuffled the management and focused everyone on the digital set-top box business, we were starting to make money – around £20m a year – not to be sneezed at, considering this was the small, renamed Betacom company that had hardly ever made a profit.
Pace was also a public company and when Malcolm Miller arrived as managing director, a new share option scheme was implemented. When the share options kicked in, Malcolm made £8m, and good luck to him. However, it seemed afterwards that Pace had a bit of a problem with their financial accounting and their relationship with the Stock Exchange.
In comparing Pace and Amstrad, I would say that, from a technical development point of view, they were superior to us in that they had loads of engineers (maybe 200 compared to our 30). However, when it came to buying and component procurement, Pace was clueless, and the same could be said when it came to manufacturing. They used sub-contractors in Romania and Hungary and even attempted to assemble some of the stuff themselves in England, the consequence being that they hardly ever made a profit. In fact, there were a couple of years when they kept putting out warnings to the stock market, saying their profit forecast w
asn’t going to be met. They would try changing their accounting period or state that some other phenomenon had arisen which had affected their figures.
By autumn 2002, Malcolm had seen the writing on the wall, in the same way as he did when he left Amstrad. There was no more big money to be made by him at Pace; it was going in the opposite direction. His contract with Pace was up and so, as he put it, he was free to leave to take up other opportunities, as you do when you realise there’s no more cash coming your way. At least he didn’t quote the usual ‘irreconcilable differences with the board’ bollocks that people use in order to piss off when they’ve copped their dosh.
While he was at Pace, Malcolm and I spoke on and off – just general industry chitchat. He never disclosed to me any of their so-called secrets or pricing. However, he did ask me why, when Amstrad took some of the Sky+ business, we slashed the price by £40. I told him he should know better than anyone that as long as we were meeting our 1.54 profit index, I was a happy bunny. The lower the price, the more orders we would all get and, more importantly, BSkyB could subsidise the product so even more consumers would take it up. He moaned about having to come down in price to compete with us and how it forced Pace to lose money.
After leaving Pace, he called me and asked whether he could come and see me at home, to seek my advice on something. He rolled up in a bright-red Ferrari, bought with some of his £8m windfall. Ann, of course, had known Malcolm since he was a youngster (remember, this was the young man who had come to work for me back in the seventies and had seen the meteoric growth of Amstrad). She’d always liked him, thinking he was an affable fellow, and now greeted him and caught up on some of the family-type small talk. It turned out that Malcolm wanted me to give him a reference for the chairman of Raymarine, a company which made equipment for the boating market. Malcolm was going to take the job of president and CEO to help Raymarine expand and get it listed on the stock market. He was hoping he would get share options and make himself another packet. I was happy to recommend Malcolm – I saw no problem in helping out some of my old people – and he got the job.
Given our long relationship, I didn’t expect what happened next. Ann and I and some friends were in Scalini, a restaurant in the West End, when I noticed Malcolm’s wife walk past our table. She saw Ann and me, stuck her nose in the air and blanked us completely. To be perfectly honest, Ann and I had never really got on well with this woman. There were always rumours around the firm that she was a bit of a demanding snob and gave Malcolm a lot of grief. In the past, the pair of them had turned down invitations to my fiftieth birthday and other family functions with various excuses, and we’d always thought it was his wife not wishing to come rather than Malcolm. However, on this occasion, Malcolm was also in the restaurant. Later in the evening, he got up with his entourage and walked out. I could see that he knew I was there, yet for some reason or other, he did not come over to my table to say hello. Given our history and the favours he had asked, I was stunned. It seemed to me a blatant snub. That was it! If Miller wanted help or advice in the future he knew where he could stick it. It seemed to me he was being a real selfish shit.
Malcolm did get in touch with Nick Hewer to say I’d misunderstood his behaviour, that really it was pressure from his wife (from whom he was now separated) and that he would like to mend the relationship. Nick, being the nice fellow he is, can sometimes be a bit naïve. I told him, ‘Malcolm is off the radar, Nick, forget him. I know what happened in that restaurant and, trust me, he was just being Mr Bigshot in front of his pals. He didn’t want to come up to someone like me, as it would have been deemed grovelling, which of course it wasn’t.’
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My son Daniel left Spurs shortly after I sold it to Enic and came back to Amshold to run the property business, Amsprop. Up until then, I hadn’t fully concentrated on the property side of things. I’d always viewed it as an investment, but boring. However, over the years, it had grown and it was now time to pay more attention to it, so I put Daniel in charge.
So far I’ve been sharing lots of stories with you about many of the deals I’ve done. Reading them, you might think I’m stretching the truth a bit or that I’ve got a big ego. They say gamblers only talk about the bets they won and forget to mention the losses. Let me assure you, no matter how unbelievable some of the stories I’ve shared may seem, they’re all 100 per cent true. Having said that, in the football days, you’d have seen another side of me. There was no shrewdness shown in some of the negotiations for players – I lost my marbles completely in that industry. I was intimidated by managers and fans into making sure we had a constant supply of players. When you’re desperate to land players, you do silly things. I could tell you stories about football deals I did where I was legged-over badly. You’d wonder whether you were reading about the same person.
Things didn’t always go smoothly in the property business either. Take the building I acquired in Old Park Lane, London, which I wanted simply because it was in such a prime location. According to the estate agent, it was being sold on behalf of some Middle Eastern gentlemen who had owned it for many years. On the ground floor and basement was the Hard Rock Café and there were six separate apartment floors above, each being around 5,000 sq ft. The apartments were totally dilapidated – they hadn’t been used for years – but the agent told me that if I were to spend just £2–3m in total on refurbishing them, we could easily sell them for around £2.5–3m each. Having been advised by this prestigious firm, and having the hots for this wonderful building, I purchased it on impulse for £12.7m and engaged the services of Igal Yawetz, the architect associated with Spurs.
To fast-track the story, it transpired we needed to spend around £12m in refurbishing the apartments, not the £2–3m the agent suggested. We found the Hard Rock Café was emitting horrible smells cooking their hamburgers, making it unbearable to live in the apartments above. And when the builders finally got on site, they discovered that the whole of the steel frame of the building was rotten. Apparently, there had been an internal water leak for the past ten years which had rusted the steel. We had used a firm of mechanical engineers to survey the building and they’d signed it off, telling us it was okay to buy. Clearly it wasn’t.
I instructed one of my staff, Andrew Cohen, together with Alan Watts at Herbert Smith, to try to recover some damages from this firm, as the cost of changing all the steel in the building was going to run to £2m alone. Andrew, a chartered surveyor, got a bit over-enthusiastic and spent months communicating with Herbert Smith. Alan Watts warned me that there’d been so many phone calls, I’d better brace myself for a very high bill, which came to over £250,000! When we finally settled with this company, we only managed to get about £1m in compensation, as this was the cap they were insured for. In the end, the lawyers got £250,000 and we got the balance. How shrewd is that, eh?
The contractors we employed were also a bunch of monkeys. Halfway through the building works, I received a surprise phone call from the Sun, telling me the Hard Rock Café building was on fire! It turned out the builders had left a heater on overnight, which had set fire to a whole section of the building. This put the contract back by about six months and a lot of the work had to be started all over again.
My daughter Louise, who was working for Amsprop at the time, was in charge of furnishing and decorating the apartments, each of which had its own character – we spent a fortune on the finest finishes. At last, we were ready to start marketing the apartments.
The Hooray Henry agent who’d sold me the building still maintained that the apartments would fetch only £2.5–3m each. I reminded this prick that he’d told me it was going to cost £3m max to refurbish the building and I had just spent the thick end of £12m. So if you divide this £12m by the six apartments, they’d already cost me £2m each on refurbishment! I told him that none of the apartments was to be sold for less than £5m. He started quoting me industry statistics on how it would be impossible to achieve £5m – effectively £1,000 per s
q ft – and how it had never been achieved, even in Mayfair, the poshest of places.
I suppose the point I’m banging on about is that these agents know sod all. They’re only interested in receiving their commission. It seems when they’re trying to sell something to you, it’s the best thing since sliced bread. When they’re trying to sell something for you, it’s the worst thing on the planet. An estate agent has a very simple business. The only thing they have to invest in is an office and some people. They have no stocks, no inventory and they have nothing to sell or buy. They make all their money by taking a commission on recommending properties to buy, or acting as an agent for sellers. Sounds good, right? Sounds good if they knew what they were talking about, but most of them don’t.
Say I had a property I wanted to sell for £5m. An agent would charge 1 per cent for selling it and if he did a good job, he’d deserve his £50,000 fee. However, say I insisted on £5.5m, his fee would be £55,000 instead of £50,000. Typically, he’ll bullshit me that the best he can do in the marketplace is £5m. All he wants is a quick sale – from his point of view £50,000 in hand is better than hanging on dreaming of £55,000. He doesn’t care that I want the extra half a million quid.
Their so-called ‘research documents’ are not worth blowing your nose with. Everything they do is based on events that happened a week before, meaning that if someone sold something for £1m last week, that is the basis of their research on how much something comparable is worth today. I explained to the bozo who’d sold us the Mayfair building that we had created 5,000 sq ft apartments – something very special, something you could not normally find in this area of London, so there was nothing to compare it to. I told him it would need a very special buyer to come along with lots of money, who would fall in love with the apartments and buy one, and that was whom they should target. If his firm wanted to sell them, he should not waste my time bringing anyone along unless they had north of £5m in their head.