Setanta’s troubles echo ITV Digital’s downfall
Formed in 1990, Setanta currently broadcasts 12 channels to 24 different countries. Their aim was to compete with Sky Sports as the main pay-per-view sports broadcaster in the United Kingdom.
In Britain, the four channels broadcast are Setanta Sports 1, Setanta Sports 2, Setanta Sports News and Setanta Golf. In Ireland there is an additional ‘Setanta Ireland’ channel.
Specialising in football, rugby, cricket, golf, boxing and gaelic games. There are over 1.2 million subscribers in the UK alone. Yet according to reports the Setanta is losing up to £100 million per year which has subsequently led to the threat of administration.
Football is the primary focus of the broadcaster. They have currently hold the rights to a number of high profile matches, both domestic and international. In May 2006, Setanta paid £392 million to show 46 Premiership matches per season.
In June 2008, they added a further package, acquiring the rights to broadcast live FA Cup matches and England international away fixtures, costing £425 million in a shared deal with ITV. Later that month they secured a £125 million contract to show matches from the Scottish Premier League until 2013/14.
Just these three packages have cost the Irish broadcasters a staggering £942 million alone. In addition they obtained packages for the right to show matches from the Guiness Premiership (£34 million), the PGA tour (£103 million) and the IPL. Spending has come to well over a billion pounds.
However when it came to renewing their Premier league package for the coming season, they failed to hang onto the 46 live matches, leaving them with a much depleted 23, costing them £155 million. The problem being is that with the reduced amount of quality games now on Setanta, fears are that viewers might begin to cancel their subscription packages.
It has been revealed that they are behind in their payments to Football Association, failing to pay a scheduled fee of £10 million. Surplus to this expense, they also owe the Scottish Premier League £3 million which they also failed to pay before the deadline passed.
What will worry the Football Association is the striking similarity between the fall of ITV digital and Setanta’s current plight. In 2001, ITV digital paid £325 million to secure broadcasting rights for the football league.
Less than a year later ITV were unable to meet the payments and failed to renegotiate the price down to £135 million. Refusing a last minute compromise of £180 million, the company filed for administration. In doing so they left the football league in turmoil and many clubs suffered a financial meltdown.
The Football Association will want to avoid such a catastrophe this time round. A crisis board meeting was held by Setanta yesterday but as of yet they have failed to come to a resolution.
Should the company enter into administration what would happen? It seems that Deloittes will step in and assume control of the firm, and the television rights that Setanta have secured would return to the right’s owners.
Subsequently, it would lead to a resale of packages. Rival broadcaster’s like BBC, ITV, Sky and ESPN would have a strong interest in buying up the Premiership, FA Cup and England matches that Setanta would be forced to forfeit.
The knock-on effect of the loss of revenue for clubs could have serious consequences in the SPL. BBC Scotland today revealed that two clubs inferred that money generated by Setanta comprises of 33% and 20% of their annual income. Administration for these clubs could be a real possibility.
It’s a sorry situation for British football as we see the over-reliance of clubs on television money. In the current economic climate, many clubs are already suffering financially and this would be a severe blow.