Setanta has lost the away game but it’s still in with a shout at home
A TV station broadcasting sports fixtures, mainly soccer, in Britain, although also to Ireland, goes out of business – so what, even if its original promoters are Irish? Somebody else will show the matches instead and, anyway, many people couldn’t afford to buy the coverage and so it doesn’t matter to them who shows the fixtures, if at all.
Many people can’t even afford Sky – despite its dominance of the televised coverage of English football and Heineken Cup and Lions rugby – so the demise of Setanta is not going to be a concern. If you had money to spare to buy additional TV sports channels, it is almost certain you subscribed to Sky. Setanta was an add-on only if you could afford it.
Such sentiments would be unworthy, however, because Setanta is a depressing example of how many dreams of Irish business becoming successful on a bigger stage are coming apart. Setanta was a noble attempt by Irish entrepreneurs to build a business out of next to nothing, but it is returning to where it came from.
Here is a company that tried to grow too fast, used borrowed money to do so and then failed to keep control of its costs – it is a metaphor for Ireland in general.
Its founders, Mickey O’Rourke and Leonard Ryan, had prospered originally by providing a service that nobody else thought worthwhile: they bought the rights to sports events involving Irish teams that ex-pats in America or Britain wanted to see and broadcast them in pubs and clubs, and later to homes.
From there they extended their operations. Bravely, they set up a sports channel for Ireland showing games nobody else here – not even RTÉ with its licence fee funding which gives it a near killer advantage in the Irish market in acquiring the rights to broadcast events – was willing to show, such as live GAA in the winter and Magners League rugby.
Encouraged, the Setanta owners asked why one company should have a monopoly on the provision of sport in Britain and sought to provide competition to Sky.
They wanted to make profit from doing so, but given the risks they took, what was wrong with that? This was not speculation in the purchase of land to build overpriced houses for which buyers would spend 30 years trying to repay loans to the banks for the privilege of having somewhere to live. This was an investment in trying to become a player in an established business by making the market bigger and providing pay television viewers with more choice. Major international investors such as Goldman Sachs and Doughty Hanson, and Irish investors such as multimillionaire Barry Maloney and clients of Davy Stockbrokers, agreed this was a viable proposition and decided to invest.
The risks were substantial, it turned out, with the duo and other shareholders losing an estimated €500 million because of Setanta’s failure.
Unfortunately, the company made a number of serious mistakes in its business model. It overpaid for the rights to broadcast certain events. Much of what it bought was not of sufficiently high quality.
The company won the right to broadcast 46 Premier League matches in England each season, but while the Monday evening slot was reasonable, the 5.15pm position on a Saturday afternoon was of limited value. Worse, Setanta got to pick matches after Sky had made its selection. Few of the games Setanta chose seemed to have much relevance and were not sufficiently attractive to justify spending at least £10 per month.
It had problems with transmission in Britain, apparently, and its customer services performance was not great by all accounts, meaning it had difficulties getting the money in. To recoup its money, Setanta needed 1.9 million customers annually but had fallen about 700,000 short. Whereas Setanta had 46 matches available to it for the coming season, starting in August, it was awarded the right to broadcast just 23 – one-sixth of the total – for the season starting August 2010. It had lowered its bid for the rights to a second package of 23 matches but was outbid by Sky.
Setanta was between a rock and a hard place. Outbid Sky and it would almost certainly lose a lot of money. Underbid, as it did, and the remaining matches it won would not be worth having. The only reason it got 23 matches was because the Premier League in England was stopped by European competition law from having an absolute monopoly.
This is where Setanta has been left down both by the British regulator, Ofcom, and by the European Commission. If both were serious about facilitating competition in the British pay television market, then Sky’s dominance had to be broken deliberately by restricting it to no more than two-thirds of the available games (as had been the case until recently). By allowing it five-sixths, the model for the remainder simply doesn’t work economically. Of course, the giant American company ESPN has stepped in now to buy the Setanta games for this season, so it must think it can succeed where the Irish company has failed. It has the resources to absorb greater losses while it tries to build a bigger subscriber base – something that will be hard to do in a recession.
That matters little now to Setanta. But all is not over. Efforts are being made to save the Irish and American businesses. The Irish operations employ close to 200 people. There are individuals willing to invest in Setanta Ireland – including concert promoter Denis Desmond and Ryan and O’Rourke, if they can raise more money, and there are suggestions that Liberty, which owns NTL and Chorus, distributors of cable television in Ireland, might be prepared to get involved, too.
HOPEFULLY, it can be saved because it would be a great pity to lose it, given the range of additional matches it brought to our screens. Some people have expressed a hope that if a rescue is not completed RTÉ would then step in to fill the gap by broadcasting the games that Setanta does at present. Somehow, though, I doubt if that would happen, given RTÉ’s own financial problems at present and the expense involved in live sport broadcasting. It cannot be cutting elsewhere and then adding events that would have relatively small audience numbers.
The knock-on consequences of the loss of Setanta Ireland to Irish sport would be substantial. Irish rugby, so successful at present, depends on Setanta not just for television income but for the exposure it offers to games, which is of great interest to sponsors and advertisers.
The top teams in Irish soccer, north and south of the border, had come to rely on the income provided by the innovative All-Ireland Setanta Cup competition. That is now in serious doubt, no matter what the outcome of the efforts to rescue the TV station, given that a rescued model would have to cut its costs to help return any investment.
Viewers would not only lose choice, but the sports would lose income.
The Last Word with Matt Cooper is broadcast on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm.
