It was reported in the Telegraph yesterday that Setanta’s failed to meet a £10m payment to the Football Association this week, as it tries desperately to renegotiate all its rights deals.
Technically Setanta has more time to pay the FA, but seems to view this withholding of payment as a negotiation tactic. But the FA are highly unlikely to let Setanta renegotiate their £150 million contract, especially as it would set a precedent for the £275 million ITV deal.
The crisis at Setanta has been brewing for a long while, but was exacerbated by Setanta’s failure last month to retain both the packages of Premier League rights that it presently owns. It paid £155 million for one package of rights but missed out on the second by just £15 million.
Setanta’s business model requires it to spend enormous sums to retain rights to popular sporting events (mainly the Premiership, Premier Rugby, the US PGA Tour and the Scottish Premier League). It then has a race against time to build and maintain its subscriptions over the time period, before the rights run out and have to be renewed again with another huge payment.
As a result, it depends on two private equity backers, Balderton Capital and Doughty Hansen, for its viability. And it appears that their patience is wearing thin – hence their decision not to provide enough cash for Setanta to win the second Premiership package.
So Setanta now needs to maintain its existing customer base with just 23 Premier League matches a season. It can potentially cut back on the 12 channels it offers, but it currently charges consumers around £13 per month for the privilege of subscribing on a non-contract basis. So customers can churn with just 30 days notice.
There must be a real danger of Setanta’s business unwinding as customers exercise their right to churn following the start of next Premiership season. So customers should enjoy Setanta while they can. Whilst it is highly unlikely that it will fail in the short term, its medium term future does seem very bleak.