The Telegeddon Fall-Out – 10 Reasons Why Setanta Failed
Few people were expecting Setanta to fail quite this quickly. By the middle of this afternoon they had entered into administration and by six o’clock this evening the plug had been pulled on this brave but misguided attempt to challenge Sky’s hegemony in the football marketplace. There are numerous reasons why Setanta failed, but we’ve taken the time to list ten reasons – which range from basic miscalculations to external factors that they couldn’t control because they weren’t in a position to – why the company ended up going to the wall.
1. They bidded massively too much for the contracts that they bought: Obvious, really, and the key reason behind the company’s failure. They didn’t just bid too much for their Premier League package, though. If the figures being thrown about of every Blue Square Premier club being out of pocket by £85,000 and every Blue Square North and South side being out of pocket by £15,000 are anything like correct, then that means that their non-league matches alone were costing them £2.5m per season alone, which is an insanely large amount of money for a league of that status.
2. They bought these contracts on a misguided premise: Setanta seem to have genuinely considered themselves as being potential competitors to Sky Sports, and buying Premier League rights as being their foothold in that long term aim. What they didn’t address, however, is the fact that the infrastructure of digital television in Britain is still massively weighed in Sky’s favour. This is due to be reviewed but it meant that Setanta would always be facing an uphill battle to turn a profit.
3. They didn’t set up a High Definition channel: HD is probably the only way that television can shape a future in the multimedia age. Indeed, the BBC is due to increase its HD coverage to Freeview in time for the 2010 World Cup. Sky’s early entry into the HD market means again that it is a market leader, but Setanta didn’t set up a HD channel, and may be regretting it now. The combination of HD broadcasting and football would have given their roster of sport an extra string to its bow.
4. The rumours over their customer service: There are plenty of people – and some of them have commented on the posts on this site about this before – that were infuriated at how difficult it was to cancel from their channel. Indeed, there are many people on forums and web sites dancing on Setanta’s grave because of this. Whether there is any truth in this is debatable (and it’s certainly true to say that the media jumped on it very quickly – draw your own conclusions), but the perception of shoddy service was certainly lodged in people’s heads.
5. They didn’t trumpet their broadband service enough: I was a user of the Setanta Broadband service and, as I reviewed on this site several months ago, it was very good – a reasonable picture quality, a short load time and it never seemed to buffer. Sky offer a streaming broadband service to those that subscribe to their television package, but Setanta was to the only way to legally watch a football package on a computer without an accompanying television package. When I went looking for it, however, it was very difficult to find – perhaps because the company wanted people to watch through the television. Considering that illegal P2P streaming of matches remains an issue that concerns the Premier League enough for them to threaten sites with legal action, why was this not pushed harder?
6. They were preaching to the converted: They had two Premier League packages, and one from the start of the 2010/11 season. However, it has been widely reported that 90% of Setanta customers also had Sky Sports packages. Setanta had the two least attractive packages that the Premier League were selling (Saturday teatime and Monday evening), so Sky subscribers were put off by paying extra for the two packages that they might have been least inclined to watch. Many people with Sky subscriptions simply didn’t want to pay what they considered to be extra money.
7. The Anti-Competition Rules Weren’t Strong Enough: Quite asides from not covering the distribution issue, the EU’s anti-competition laws didn’t go far enough. The Premier League offered six packages up for sale, but only one of them had to be sold to a second bidder. Setanta limped along with two packages (46 matches), but when that was halved they were fatally wounded. The commission could have insisted that rights packages were equally split or that a proportion of them went to a FTA (Free To Air – the BBC, for example) channel, but they didn’t. This meant that Setanta’s package would always be inferior to Sky’s, meaning that it would have to be substantially cheaper.
8. They followed a business plan that had already failed once: ITV Digital had already tried paying massive money for television rights to football and collapsed accordingly in 2002. Setanta made a basic miscalculation in their business plan which was that, whereas people hadn’t been happy to pay for the Football League on their television, they would pay for the Premier League. There is now so much football on the television that many people chose to do without Setanta and, given the economic downturn, this may have been the outcome even without the bad publicity created by them losing one set of Premier League rights earlier this year.
9. The Premier League were hostile to them: All of the talk of the Premier League playing “hard ball” with Setanta was a slight misinterpretation of what was going on. It is widely believed that the PL has been actively lobbying the EU to end the competition rules that were introduced. The failure of Setanta suited them in this respect, giving them ammunition to say, “Look, this isn’t working”. Exclusivity adds a certain premium to the television rights, after all. Notwithstanding the claims currently being made that Setanta had not been paying the PL on time for a while (it would be interesting to see where they emanated from and how true they are), to withdraw the rights from them so quickly indicates that the PL didn’t want them to hold them at all.
10. There was nothing wrong with their actual coverage: Give me the choice between watching the same match on Sky Sports, the BBC, ITV or Setanta and I would probably have gone for Setanta. Their coverage of BSP matches was outstanding, and they didn’t do anything – picture quality aside, but let’s assume that all companies in this example are working from the same technological jump off point – any worse than any of their competitors. People turning up on messageboards now saying that their coverage was “crap” are wrong, by and large. If the collapse of Setanta proves anything beyond any doubt, it is that quality of sports coverage counts for little with viewers these days in comparison with having the right packages of sports in the first place.
This will be this site’s final word on the subject. The SPL seem to have picked up a deal with Sky Sports and, although it’s not as good as the one that they had with Setanta, they should at least get paid on time. The FA (who hold the rights to Setanta’s FA Cup and England matches) seem to have insisted on a front-loading of payments which may just shield them from the worst effects of the collapse. The BSP, however, remains in a state of limbo. They could (and in all likelihood will) go back to Sky or be snaffled up on the cheap by ESPN, but one can hope amongst hope that one of the FTA channels might see the potential in putting the league on, and the BSP might even see the massive potential in not even charging them for it. As we can see from the amounts of money that have been being thrown about for television rights to broadcast football over the last few years, however, common sense seems to be in pretty short demand when it comes to football and money.