What You See Is What You Get: My Autobiography (93 page)

My tirade paid off. I had touched a nerve. Tony told me that, in truth, the e-auction had turned out to be a bit of a disaster. When it got down to the nitty-gritty, people like Thomson and Pace were all bidding low, but supplementing their bids with loads of caveats and extra costs, which meant the bids were worthless. He told me they'd paid some consultancy firm a big fee to initiate this e-auction crap and he'd subsequently canned it. When BSkyB finally dished out orders for that particular period, they had to start from scratch in the conventional way.

Regrettably, you can win a little battle, but there's always a danger that you will go on to lose the war. Tony Ball had a lot more to worry about than Amstrad and eventually the business ended up being done by the middle management, who were totally pissed off that each and every time something didn't go right for Alan Sugar, he got on the phone and complained to the boss.

I don't know whether I was justified in feeling that I had a right to be a supplier since I'd helped them start the business. I
did
feel they owed me something, but perhaps I'm old-fashioned -
I
was in the habit of remaining loyal to
my
suppliers, but that was an ethic not shared by this new wave of young management. Also, while we had always been able to fight on price, special cosy relationships between buyers and suppliers were never our forte. As a result, we now found our technical ability and quality constantly questioned and compared unfavourably to those of the preferred competition. It simply goes to show that in the cruel, hard world of business there is no sentiment.

While all this was going on, Ian Saward had managed to get to grips with developing digital satellite receivers in the traditional Amstrad way. We found a very hungry chip manufacturer, Connexant, who could supply the core chips and, more importantly, would take on most of the rocket-science software development, allowing us to concentrate on the hardware. We developed a win-win situation between Connexant and our own hardware people and were able to develop the digital boxes quickly and recover our position from being behind the pack.

On top of becoming one of the suppliers to BSkyB, we also managed to pull off a deal with Sky Italia, a company owned by News Corporation, to supply them with digital boxes, so things were going quite well on that front.

However, the relationship between BSkyB's middle management and Amstrad was still quite frosty, so much so that we were totally excluded from
a brand-new technology, one which would go on to revolutionise the face of digital television. This was the digital PVR (personal video recorder), a set-top box incorporating a hard disk drive which enabled users to record TV programmes. It effectively replaced the VCR.

BSkyB had secretly developed a PVR with Pace - they called it 'Sky+'. Launched in September 2001, it was a great product. Customers could use an on-screen TV guide to choose the programmes they wanted to record. I fully believed the advent of Sky+ was going to change the habits of TV viewers and I said as much during a Q&A with a group of advertising executives at a function hosted by ITV. They invited me along to give my opinion on marketing in general. During the session, I must have upset the hosts because I told the advertising executives, 'If I were you, I'd leave ITV and get a job with the BBC because the writing is on the wall.'

ITV's revenue came from advertising. Why should viewers sit through an hour-long TV show which effectively only provides forty-five minutes of real programming (plus fifteen minutes of adverts) when they can whizz past the adverts and get back to the programme? My comments that day were premature and the audience couldn't understand what I was talking about. They thought I was just being provocative. But anyone who was there and recalls what I said would agree about the effect Sky+ has had on TV advertising. In the United States, advertisers are no longer interested in hearing how many people viewed a particular show; they want to know how many people saw their adverts in the breaks. One of the advantages of digital equipment is its ability to store data inside the box which can be read remotely by the broadcasters, giving them visibility on consumers' viewing habits. Giant companies like Coca-Cola or Gillette in the United States are demanding data to verify that people actually
saw
their adverts and didn't skip through them on their PVRs. Only on the basis of this proof are they prepared to pay for advertising.

When I first saw Sky+, alarm bells started to ring in my head - not because of any concern for the advertising industry, but rather that Amstrad might be kicked out as suppliers to BSkyB. To my mind, it was inevitable that the conventional set-top box would die off and the whole market would change to Sky+.

Ian Saward told me the engineers at BSkyB would not release any technical data to us - their boss had told them Amstrad was not in the frame to be a supplier of PVRs. I suggested we should go ahead and develop the box anyway and once we had it working I'd present it to BSkyB as a fait accompli and hit them with a fantastic price. He explained that while my idea was
good, it would be impossible to develop the box unless certain BSkyB contractors would co-operate and give us some of the technical data.

It was time for me to get on the phone again to Tony Ball. Tony was a bit fed up with me pestering him all the time and he told me this approach wasn't doing Amstrad any good inside BSkyB. He said that instead of me crying into my beer, our companies should try to enhance relationships at middle management level.

The good thing about Tony was that we could talk frankly in this kind of way. I laid my cards on the table and told him I understood that he, as head of Sky, had lots of things on his plate and procurement of set-top boxes was probably one of the least important things he had to worry about. I understood him leaving this matter to his management, particularly on the technical front, but I wanted him to know one important fact. I said to him, 'Your procurement people are
not
being fair at all. To be perfectly blunt, they don't like Amstrad simply because we've sung the old "Sugar knows Murdoch" song so many times. On top of this, the Pace people are so far up their arses, it's untrue. And it's not
just
your middle management giving us grief - I get the distinct impression that the organ grinder on the technical side of things is
Pace
rather than your people. And, of course, Pace is
bound
to try to stand in our way.'

I won't say it was a row, but Tony didn't like me telling him what I considered to be a few home truths. But he was a fair bloke and, to make a long story short, he instructed his people to release to Amstrad all the technical documentation on Sky+. I told him we'd sign all the non-disclosure agreements he wanted.

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 PS40 cheaper than Pace's. The French company Thomson had also been taken on by BSkyB as a second supplier and we were PS40 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 PS40 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 PS20m a year - not to be sneezed at, considering this was the small, renamed Betacom company that had hardly ever made a profit.