Setanta's plight heralds full time for big sports

Some view Setanta's downfall as emblematic of boom-time Celtic Tiger chutzpah, while others put it down to bad timing and bad luck. Roisin Burke reports

Roisin Burke reports

The Scottish Premier League is hugely reliant on Setanta Sports, which owes the SPL £13.5m this year, plus almost double the money of the previous deal at £150m for the next four years from 2010

From boom to 'what now?' - Fuelled by their own appetite for Irish sports , ex-pats Michael O'Rourke and Leonard Ryan (below) acquired rights for the Ireland-Holland World Cup match and showed it in the Top Hat dance hall in London's Ealing in 1990 for a fiver per punter. Setanta Sports was founded two years later and international expansion began soon after. Scoring big EPL TV rights for 2007-2009 and the SPL rights took it into the bigtime. Losing the juicier matches for the 2010-2012 EPL games, coupled with recession woes left its future hanging in the balance.

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The woes of Setanta Sports can be explained away by a range of factors, but the crucial moment when things turned from very good to very bad was when it lost out on all but 23 English Premier League (EPL) fixtures to giant rival Sky Sports. While Setanta could only hold this modest collection of matches, behemoth Sky scored five of the six packages, totalling 115 games.

The loss was a disaster, crushing Setanta's chances of building up its subscriber numbers to the vital 1.7 million or more it needed to break even. In fact, it meant worse than that – subscriber attrition.

Some analysts would say the rot set in even before this. "There was a clash at board level between those whose approach was bigger, more, faster and a more measured view," a source close to the company said on Thursday. "Ironically, both sides were right in different ways; being too cautious cost Setanta a good stake in the EPL rights, but growing too fast and grabbing for more and more could cost the company."

Setanta had a lucky break in the last round of Premiership TV rights' bidding when the EU competition authorities said Sky couldn't buy all packages. Setanta was able to parachute in and bid for a lucrative share. But this time round, it seems to have misjudged its bidding strategy.

Tomorrow, a £30m (€35m) payment to the British Football Association (FA) is due. Setanta failed to make a £3m payment to the Scottish Premiership League (SPL) last week.

Missed payment

As well as trying to haggle with the SPL on agreed rights fees, Setanta last week asked Sky for a £50m interest-free loan and in return offered access to the live rights to 46 EPL games next season. Sky responded that it was a broadcaster, not a banker. However, the demise of Setanta would be no boon to Sky Sports, as it would leave it with no obvious competitor in Ireland or the UK and place it under the beady-eyed scrutiny of the competition watchdogs.

As well as the recent missed payment, Setanta owes the SPL £13.5m this year, plus almost double the money of the previous deal at £150m for the next four years from 2010. Not having the deep pockets of the FA, it is hugely reliant on Setanta's money. It parted ways with Sky and then with the BBC some years back, selling all its game rights to Setanta instead.

"A lot of clubs have made it known that at least 30% of their income is from Setanta," football finance expert with Pannell Kerr Foster, Charles Barnett said. "SPL rights, if resold, could go for as little as 20% of what Setanta paid.

"In the short to medium term, one assumes it's more of a buyer's market, particularly for next season, especially for the SPL. But the EPL will also be down by slightly less than a third," Barnett predicted.

The squeeze is on for any broadcaster in terms of subscriptions and advertising, which will affect rights prices from 2010 or 2011 onwards, Barnett expects.

Although the EPL is owed the most money by Setanta – £130m for this season and £158m for the three seasons after that – it is in the better position than most, with its very sellable product.

Deeply discounted rates will likely apply to any of Setanta's sporting TV rights that end up being sold off. Potential bargain buys could include eight England friendly internationals, which Setanta paid £40m in total for. There is little chance of it reselling for anything close to that price.

Happily for the FAI, its only exposure is through the Setanta Cup, with its €100,000 prize. An FAI spokesman said that it viewed Setanta Ireland's separate business unit status and its being moderately profitable as making it less vulnerable to the fallout the broadcaster failing.

Many of Setanta's international channels, in the US, Canada and Ireland, which sell mostly British or Irish sports events are said to be in decent shape.

Contracts

Setanta has TV rights contracts with the Barclays Premier League, the FA and the Scottish Premier League (SPL), but also to screen Guinness Premiership rugby union (from 2010), the Professional Golfers' Association (PGA) tour in the US and Indian Premier League cricket.

Setanta going under would leave an estimated £500m shortfall in the sports TV rights market in the UK.

Main backers are private equity firm Doughty Hanson and Barry Maloney's Balderton Capital, which have lately stumped up £40m of the £100m Setanta reportedly needs to survives, but don't wish to put in further monies. Music promoter Denis Desmond is a 20% stakeholder in the company that holds the licence for Setanta's Irish televsion channel.

The critics of Setanta remain convinced the company expanded too far, too fast. Getting subscriber numbers is always a battle and when the numbers didn't materialise the company seemed to have little alternative strategy.

The problem has always been convincing subscribers they should pay for Sky Sports, plus another subscription service. It is always a tough ask unless you are dealing with the most fanatical of football or sports fans.

Setanta has suspended subscriptions while it "attempts to secure the future of the business" it posted on its website last week. "All our channels are still broadcasting across all platforms and our subscribers can continue to enjoy our programming."

However others are more concerned about the wider implications, particularly with so many key players heading away for summer vacations.

"The football season starts in mid-August so there isn't a lot of time to sort this out," Barnett said.