Setanta’s Demise

By on Jun 9, 2009 in Latest | 1 comment

So much for the competition laws on broadcasting, then. When the European Union introduced new laws which were meant to prevent one broadcaster taking a monopoly of sports broadcasting, it seemed as if the viewer could only benefit. Sky’s monopoly on Premier League football was, we were told, finally broken as a new deal was struck with two-thirds of matches going to them and one-third to Setanta Sports. However, Setanta  appear to have taken on too much too soon, and this week they are on the verge of having to enter into administration, which could have very serious ramifications for English football clubs.

The Premier League offers six packages up for sale to the highest bidder, and the deal that is just ending saw four of the six deals taken up by Sky Sports and two by Setanta. Earlier this year, however, the contracts were renegotiated, and Setanta picked up just one of the six packages on offer, halving their Premier League coverage from the start of the season after next. This had two effects on the company. Firstly, the negative publicity that they received from it seriously affected the number of new subscribers to the company, and secondly it made the company’s backers more twitchy about pouring more money into a company which has not turned a profit since it won Premier League rights for the first time three years ago.

Setanta have been struggling for the last few months, with rumours in the media also saying that they have overstretched themselves in buying rugby, cricket and golf highlights on top of the hundreds of millions of pounds that they had spent on English, Scottish and European football. Consultants at Enders Analysis have calculated that Setanta needed 1.9m subscribers to reach their break even figure, but the company have only 1.2m subscribers at present. There have been rumours that retailers have started to remove Setanta boxes from the shelves of their premises and new subscription area of the company’s website has been down for “routine maintenance” for the last twenty-four hours.

The crisis appears to have taken a turn for the terminal after Setanta defaulted on a £3m payment to the Scottish Premier League yesterday. Sensationalist stories in the press insinuated that this could lead to bankruptcies amongst Scottish clubs but the SFA are said to be taking steps to ensure that clubs are paid the money that they would have been paid had Setanta come up with the money. The next crisis moment comes in a couple of weeks time, when Setanta are due to make their next payment on the considerably more expensive Premier League contract. It is, at this time, difficult to see the company continuing to stay afloat for the forseeable future.

What happens, then, if or when Setanta finally goes under? In the normal case of a company in administration the administrators would sell off the company’s assets to the highest bidder, but in the still comparatively regulated world of broadcasting, it’s not quite that simple. What we can expect is a renewed tightening of Sky’s grip over the game, with FA Cup and England match rights most likely reverting back to them. The Blue Square Premier would lose its television coverage. No-one knows whether anyone would step in to buy it up. The Setanta packages for the Premier League will come up for sale to the highest bidder and it’s difficult to envisage the fifth package not simply going to Sky a year early.

The sixth package, however, is more complex because Sky cannot by law purchase it. The favourites to buy it up would be the Disney-owned ESPN (who lost out to Setanta in the bidding process earlier this year), but whether they would be able to get the technical infrastructure in place to start broadcasting at just a few weeks notice is open to question. It is possible that the package could go to a “free to air” broadcaster (such as the BBC or Five) or a combination of the, but in the current economic climate it is doubtful that they would be able to match the sort of bid that a subscription company could offer.

It’s not all good news for Sky, either. Sky’s competitors in the British market are pressuring the broadcasting regulator OfCom into the “wholesale” sale of Sky’s television rights to make them available to people with other subscription services such as BT Vision and Virgin Media. Sky’s aggressive approach in the marketplace is somewhat at odds with the current vogue for a slightly more even distribution of rights. In the next couple of weeks, Ofcom will rule on whether it should force BSkyB to sell on its rights to its competitors and if so, at what price.

The worst news, of course, will be for football clubs. The one thing about this whole debacle that can be more or less guaranteed is that the resale value of the packages that Setanta sheds as it withers away will be lower than had been previously agreed. When ITV Digital went under in 2002, the members of the Football League suddenly had a crisis in their hands as revenues upon which they had based future expenditure (and in more than one case had borrowed against) failed to materialise. It took years for the after effects of this to subside. Premier League clubs are probably better prepared to weather such a storm, but we don’t know what the effect will be upon Blue Square Premier clubs, for example, or what sort of effect this will have on television rights for FA Cup matches next season, the revenue for which provides a much-needed boost to non-league bank accounts.

Football continues to defy logic in continuing to pin its financial security on television, which is, in the long run, a dying medium. The continuing paucity of high quality, affordable broadband services is proof in itself of the fact that this most modern of sports continues, in some respects, to live two decades in the past. In some respects, the competition laws have worked against themselves as well, as they merely pushed up the bidding prices for Premier League football. Ultimately, the attempt to introduce competition in football broadcasting has failed because it was too weak. If six packages are on offer for Premier League football but five can (and this is exactly what happened earlier this year) end up on one channel, the company with the sixth will simply not offer any genuine competition. It would be foolish to expect anyone within the game itself or within the major broadcasting players to do anything to make watching it more accessible or more affordable, though.

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    1 Comment

  1. Their ludicrous cancellation policy coupled with their horrendous customer service did them in for me. The smugness and inflexible arrogance that exuded from the people manning the call centres did them no favours at all.

    Their ridiculous Freeview package was annoying as well – you paid the same price for one channel that Sky customers pay for several.

    If they’d done a ‘football-only’ channel that was £100 a year, payable up-front at the beginning of August (pro-rata through the year, so if you join in January you’d pay £50 immediately and £100 every August from then on) they would still have me as a customer. They could have sold the channel airtime on in June/July as well.

    CTT

    June 9, 2009

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