It’s not looking good for Setanta. As the bills mount, reports today suggest the ailing Dublin-based pay-TV broadcaster is in talks with possible backers about pumping in an extra £100m. However, given that it’s reportedly losing about £100m a year, doesn’t have enough subscribers to break even, and is only one season away from losing half of its most valuable asset – i.e. live English football – it’s a bit hard to see why anyone would bother. Is Setanta about to pay the price for flying too close to the sun – or in this case, the Sky?
Setanta’s immediate problem is a £30m bill due to the English Premier League before Monday, as part of its current deal to show 46 live matches a season. But given that it’s already missed a £3m payment to the Scottish Premier League, it doesn’t seem to have the cash – so without fresh funds, it could end up in administration. And its problems actually run much deeper than that. In the last few years, Setanta has grown aggressively by shelling out big sums for sporting rights – not just football, but also cricket and golf. To make its model work, it needs a subscriber base of almost 2m; in practice, it’s only got about 1.2m.
To make matters worse, earlier this year it lost the rights to one of its two football packages, so as of the season after next, it will only be showing 23 English games (Sky, by comparison, will have 115). It also scored an own goal by failing to resell its exclusive highlights of England away games to the terrestrial broadcasters – which actually prompted fan protests in the stands. Throw in its generally lamentable customer service (MT once spent half an hour trying to sign up, before eventually going through to an answerphone), and it seems likely that its subscriber numbers will go down, not up.
Setanta's only hope of survival may be to re-invent itself as a wholesaler, selling its coverage to the likes of Sky rather than directly to customers - although the word is that a similar deal it struck with Virgin was far too generous (with revenues split 85-15 in favour of its partner). But either way, it's likely to wipe out the £450m invested by its backers, Goldman Sachs and a group of venture capitalists (who have been accused of trying to 'flip' the firm too fast). So it doesn’t seem like the most attractive investment prospect. Apparently Sky has just refused to bail them out by shelling out £50m for its Premier League games next season – and who can blame them? After all, it’s hardly likely to sell any more subscriptions as a result, particularly since it’s snaffled all the best matches already. 'Our job is not to fund other companies,' CEO Jeremy Darroch said yesterday (not unreasonably).
So the situation looks glum – not just for Setanta, but also for the sports that its money has been funding. The English Premier League clubs are rich enough to survive, thanks to Sky. But some Scottish clubs rely on Setanta for a third of their income, and unlike the EPL, it won't be easy to sell on these TV rights - certainly not at the price Setanta paid. As with the ITV Digital collapse, it's the little clubs that are likely to be the biggest losers...
In today's bulletin:
Is Northern Rock back on the block?
Setanta proving a turn-off for investors
Halfords pedals up profits as commuters get on their bikes
BP's top woman Vivienne Cox resigns
MT Special: Deborah Meaden on what makes a good entrepreneur