Wednesday 10 June ~
Setanta have not yet incorporated the words “troubled Irish broadcaster” into their official name, but the plight of the TV company could have major implications for football. After steady growth from its beginning in 1990, Setanta became a major player when the EU challenged Sky’s dominance of football broadcast rights. In 2006 they secured a package worth £392 million to show 46 Premier League matches per season for three years. Last year it extended its association with the Scottish Premier League and paid £125m for rights through to 2013-14, with a further £425m for England and FA Cup matches, a deal it shares with ITV.
The company was always dependent on retail subscribers, and analysts have suggested that 1.9m direct customers are needed to break even. Although Setanta boast of 3m subscribers only a little over 1m subscribe directly, the remainder are wholesale customers, for example through Virgin Media. A drop in its Premier League coverage to only 23 matches for 2010-11 means that it no longer has the “critical mass” to attract the additional customers it needs. The crunch has come as payments to the FA, the SPL and the Premier League have fallen due. A £3m payment to the SPL has not been made and £30m is due to the Premier League on Monday. Reports show that some creditors are willing to be flexible, with the SPL making confident noises about its ability to ride out a temporary storm. The exception is the glorious Darwinian Premier League, whose “source” told the Financial Times: “If people can’t run their businesses properly and enter into arrangements they cannot fulfil, that’s not our fault.” Not much flexibility there.
So what happens to the football deals if Setanta goes into administration? Although the SPL seems happy, any loss of income would be felt by clubs – one newspaper even named four Scottish clubs said to be at financial risk. For the PL and the FA it depends on their ability to resell the rights. Claire Enders, a media research analyst speaking to the Guardian, described the PL as believing that the rights could be sold on easily. She has a similar view of the FA’s outlook, and comments that “it would be a miracle” if they could sell the rights on at their current value.
The difficulty is that there are no obvious buyers. ITV and Five have both suffered falls in advertising revenues. Sky, undoubtedly, would like to buy but competition laws will prevent this: they could buy half of the 2009-10 rights, but cannot increase their position for 2010-11. The other potential bidder is Disney-owned ESPN, which has expressed an interest for some years. ESPN has shown the Champions League final for several years (it lost the rights this year but has broadcast it across the USA and to 115 countries worldwide) and holds rights to the 2010 and 2014 World Cups and the 2011 Women’s World Cup. The chance is it would bid only after Setanta had gone into administration hoping to snap up the rights in a fire sale.
The wisdom seems to be for creditors not to push the broadcaster out of business, but the PL believes it has cast-iron contracts that tie in Setanta’s backers. Along with the property and credit bubbles the sports-rights bubble may be about to burst and unless new players come into the market, the value of the rights may well plummet next time round, with potentially dire consequences for professional football in the UK. Brian Simpson