What You See Is What You Get: My Autobiography (61 page)

That was the general gist of the conversation. However, in the back of my mind, I knew I could sell all 200,000 receivers to Germany and make a huge profit. There was massive demand and we had no stock. It would take sixty days at least to get fresh stuff from the Far East, but I certainly wasn't going to take them back from Dixons at the price I'd sold them for, only to go and sell them again at the same price in Germany. Why should I bother?

After a few backwards and forwards phone calls with Churchill, I told him, 'In business, you have to know when to cut your losses. I'm quite prepared to take these things back off you for half of what you paid for them. Remember, I never held a gun to your head; it was Souhami who wanted to buy half a million pieces. In fact, you're lucky I didn't ship you the other 150,000 you were supposed to take - you only took in 350,000. Anyway, that's my offer.'

Sharp as a needle, Danny said, 'Well, what are
you
going to do with them then?'

I told him it was really none of his business. I mentioned that I might try to sell them in the European market through one of my subsidiaries, but that's about all I was prepared to say. I struck a deal with Dixons and we sent a load of trucks to their Stevenage warehouse to pick up the stuff. We shipped the whole lot to Germany and sold them again for a handsome profit.

Should I feel guilty? Absolutely not. There was no love lost between Dixons and Amstrad - we both knew where we stood. To be fair, Stanley took his loss in the same way that I took mine when I had that fire sale a year or
so earlier. I should add at this point that
outside
business, Stanley and I got on very well.

*

Rupert Murdoch appointed a series of people to run Sky initially. The first one I came across was Andrew Neil. He was the editor of the
Sunday Times
and had been promoted to try to run this Sky business. He came along to visit me in Brentwood to see how fast we could get these new receiver-decoders into the marketplace. Andrew was not a technical person at all - he just came along, I guess under Rupert's instructions, to see if he could rush up supplies. Andrew didn't last too long at Sky.

Rupert had put a hold on everything until the market could be supplied with receiver-decoders so he could start charging subscriptions. The lesson learned from Dixons was that the number of people who were willing to fork out PS199 for the product was limited to around 150,000. If Rupert's Sky was going to grow to the millions of subscribers he wanted, there was only one way of doing it, and that was to give away the boxes and dishes for
free.
This was something I'd been discussing with him as an alternative.

I have to say, you very rarely come across a bloke like Rupert Murdoch. He has got balls of steel because the risk he took in this business was unbelievable - his decision to
give away
the equipment was remarkable. Now Sky would have to buy the stuff from me, as well as finance a team of salespeople and installers to go out and fit them in people's homes.

I remember being called to a meeting in Wapping with David Hyams. Rupert invited me into his big boardroom, where a load of very important people sat around the table; they must have been directors of the main News Corporation board. The topic on the agenda was this gigantic decision - whether or not to change their business model and buy a load of satellite receivers to give away in order to build up a subscriber base.

Rupert invited me in to talk and I threw my tuppence ha'penny worth in, saying that it seemed to me to be a reasonable bet - if you gave the equipment free to customers, they would pay a monthly fee to receive additional television channels as long as the content was good. For example, there had to be movies that customers couldn't rent from Blockbuster. I also mentioned other programme content, such as sport. There had to be a mixture of some free telly and some subscription channels. Finally, it would be down to how much they expected punters to pay per month. All of this was simply repeating what Rupert had already told them.

I remember one guy in the meeting hinting that
I
should join in the
initiative and supply my boxes free of charge in exchange for a share in Sky Television. I remember half joking with him, saying, 'Well, why don't you, News Corporation, buy my company Amstrad? Then you'd be getting the products at cost price.'

It was quite amusing banter, but I'm not sure he had thrown his suggestion across the table as a joke. Certainly, I wasn't laughing, as that was the last thing on my mind, although, using that wonderful thing called hindsight, if I
had
said yes, it might have been the biggest and best decision I'd ever made in my business life, given the subsequent success of Sky (or BSkyB as we know it today). But I was a manufacturer and I'd always been a manufacturer - I wanted to stick to selling stuff and getting paid for it.

I was asked to leave the room and Rupert very kindly let me use his office, where David Hyams and I sat and had some lunch. Rupert walked in afterwards and told me that they'd agreed to give me an order for half a million boxes. We dealt with it there and then. After a bit of to-ing and fro-ing, with News Corporation's lawyer running in and out of Rupert's boardroom, we did a deal on two sheets of paper. Both Rupert and I instructed the lawyers that we didn't want a fifty-page document; it had to be very simple.

I walked out of that building with a PS78m order. David Hyams couldn't believe it. At this time, late 1989, we knew it would be such a shot in the arm to all the boys back in Brentwood, considering the tough times we were going through on the PC2000 series.

After the meeting in Wapping, the focus was now on getting these new receiver-decoders to market quickly. Thomson had also been given an order and promised to get their units to the market on time. My parting comment to Rupert was, 'I bet you ten dollars that even though I'm using
Thomsons
technology, I'll have our unit to market quicker than they do, even if they
are
the inventors of VideoCrypt.' He shook my hand in front of his board of directors as I left.

To show you how horrible these Thomson people were, I'll share another story. Our chief engineer, Ian Saward, was a specialist in satellite receivers. He was tasked with developing the new receiver-decoder and obtaining technical approval from Thomson. We had already engineered the product and got it working and were ready to push the button on production. However, we couldn't get supplies of the SGS chip until we'd received approval from Thomson. Ian told me that we'd sent them a sample over three weeks before, but they hadn't tested it yet.

I went nuts. I called some person in France and asked them what the hell they were playing at. This was their answer: 'Yes, you have sent us a sample,
but the sample is currently in customs. It is not our job to clear your sample with customs - it is your job to deliver your sample to the doors of our laboratory.' Bastards. They were deliberately slowing us down.

I suggested that Ian get another sample, jump on a plane, go to their offices and stand there while they tested it. Ian went, but they would not allow him into their laboratory or give him a time when they would start testing it. They said, 'We are very busy and we do not know what time slot we can give you. We will let you know.'

Two weeks passed. Nothing.

We screamed down the phone at them, asking what was going on. They told us, 'We have tested your unit and it has failed.'

'How did it fail?'

'It is not for us to tell you how it failed; it is for you to look at our specification and make sure it passes.'

'Well, just tell us which
part
of the specification it failed.'

'No, we have told you - it is not for us to tell you which part of the specification it failed; it is for you to make sure you present an item that passes.'

This was getting out of hand now. We had over half a million other parts sitting in the Far East ready to produce, but Thomson would not pass the product - and we knew there was nothing wrong with it. I spoke to David Hyams who advised me that what they were doing was tantamount to being illegal.

I got on to News Corporation's lawyers and, together with Herbert Smith's lawyers, we sent a stinging letter to Thomson threatening that we would report this matter to the European Community's Restrictive Practices organisation. These letters went by fax the next day (getting lawyers to work that fast was a miracle).

We must have touched a nerve because the engineering people at Thomson were instructed to inform Ian Saward exactly which part of our satellite receiver had failed. When we got the unit back and looked for the problem they'd outlined, we found that, in fact, nothing had failed. We tested the unit thoroughly in our laboratory and it sailed through. One of our engineers was sent on a plane to Thomson, who retested the unit and finally gave us technical approval which enabled us to get the chips from SGS in Milan.

Sky Television was steaming ahead, taking premises in Isleworth, west London, where they built studios to transmit Sky News. Rupert had employed a Scottish fellow, Liam, to be in charge of the logistics of taking the satellite receivers from us and installing them for customers, including setting up a network of salespeople and installers.

At the time, apart from the opportunity of buying movies on a pay-per-view basis, Sky did not own any other major rights such as football or cricket. I think it fair to say that in the early days of Sky, the sales team were a bit like double-glazing salesmen - they were incentivised to get subscribers. Who knows what bullshit they were giving people, but they were certainly getting a lot of product installed around the country. The viewer base was growing.

However, what Liam had organised was
chaos
- although to be fair he had an almost impossible job when you compare his small team with the infrastructure that exists at Sky today. We started to hear rumours that installers were stealing boxes and dishes, that there was no control on inventory or the quality of the subscribers they were signing up. The running joke was that a salesman would turn up at a house, see a kid and say, 'Do you want to watch cartoons?'

'Yes.'

'Sign here.'

Bingo. That was an installation. It was a real shambles. Nothing compared to today's brilliantly slick Sky operation.

The boss of Sky at the time was another one of Murdoch's editors, Kelvin MacKenzie, who had successfully edited the
Sun.
It was clear that changes were needed and Rupert took action, appointing a heavy-hitter from Australia, Sam Chisholm. He was the first guy to come onboard who had some actual knowledge of the Pay TV industry. Sam had successfully worked for Kerry Packer in Australia and he was brought in to take over as top man at Sky.

I'll never forget my first meeting with Sam Chisholm, a short, round-faced fellow, in his mid-fifties I guess, with a broad Australian accent. You could see this bloke had fire in his belly and he talked with an air of authority - you got the feeling he was a tough street-fighter. He came to my offices in Brentwood with Liam and when we offered him coffee or tea, he abruptly said, 'No, thank you, no. I've got to get down to business. These orders you're shipping us have got to stop. We've got stock coming out of our ears - you simply have to stop.'

That was his opening gambit. We had shipped all the goods ordered at the meeting in Wapping and Liam had placed more and more orders, as he was putting more and more units into the market. Now people were sending them back or telling Sky they didn't want them and a lot of people weren't paying the subscriptions. Chisholm had been thrown in at the deep end to try to stop this fiasco and get the business on the right track. His first port of call was me.

Sam sat in my office, opposite me, with Liam behind him. You could see from his body language that Liam resented Sam Chisholm's presence and was revelling in seeing Chisholm try to cancel the massive orders. Liam had obviously briefed Chisholm that I was not someone to mess with because, despite Sam's bravado (I can remember it as if it were today), his hands were actually shaking. Liam, meanwhile, was smiling at me.

I am a realistic person. This wasn't the Nigerian United Africa Company, this was not a case of taking the money and running; this was a serious business and it was clear that it had got totally out of hand. There would be no future for Amstrad in this business if it were to carry on this way. I knew this had to stop. In fact, I was surprised it had taken so long for someone to come along and pull the plug.

I decided to help out. I assured Sam that I would do everything in my power to slow production down until he got himself sorted out, but this might mean the cancellation of a lot of components which were particular to his model. I was honest with him - I told him I'd be able to re-use 65 per cent of the components in a model which I could sell in Germany. He was very relieved at my reaction, as he'd thought his first meeting with me would end up with us having a big legal battle.

I told Sam not to worry, that I was standing alongside him as part of the family. I had seen Sky Television announced back in June 1988, launched in 1989 and had kept my promise to have equipment in the shops by February 1989. I'd even won my $10 bet with Rupert by getting our receiver-decoders to the market first. I said to Sam, As far as I'm concerned, apart from making money selling these things to you, I'm actually enjoying watching this new television network being born, so I'm onside with you. I'll come back to you in a week or so, when my people have done the calculations, and I'll advise you of the financial exposure on the components we can't use.'