Wednesday, June 10, 2009

What could Setanta's demise mean for soccer?

Things aren't looking too good for Setanta, one of the primary worldwide broadcasters of the English Premier League. According to The Times, the company may go off the air "at any moment" after fellow broadcaster BSkyB declined to provide them with a £50 million [BBC News] loan in exchange for access to their live EPL rights. They've also apparently suspended new subscriptions [Ireland Online, found via Brian Zygo]. Founders Leonard Ryan and Michael O'Rourke are reportedly trying to find a new source of financing, but that isn't easy these days.

This could have profound implications for soccer across the globe. Some of the most drastic effects will likely take place in the Scottish Premier League. Check out this passage from the Times article:

"The worst effects of a Setanta collapse, though, would be felt in Scotland. Payments currently due to the individual SPL clubs range in size from £70,000 to nearly £750,000, with the Old Firm obviously taking the greatest hits. Yet Rangers and Celtic can probably withstand such setbacks — it is the smaller clubs who will feel the losses more deeply.

The SPL will hold a press conference today at Hampden Park outlining its plans for dealing with the crisis. The gist of it could be neatly summed up by SPL administrators holding up a placard with the words: 'For Sale, Scottish Football. All Bids Welcome.'"

That doesn't seem like much of an exaggeration. Setanta's SPL deal is worth £125 million over four years, and you can bet no other broadcaster will be willing to pay anything close to that rate. For one thing, the SPL isn't exactly the most desirable property out there. The divide between the big clubs (Rangers and Celtic) and the rest of the pack is perhaps more pronounced than in any other top-tier league, at least to my mind, and few of the other clubs have much of a profile outside Scotland. The league is basically one long competition to see which of the Old Firm clubs wins the title and which smaller club takes third. Sure, there are other leagues with parity problems, but most of them have more clubs with a legitimate shot at the title (such as the English Premier League's Big Four) and other clubs that aren't that far behind (such as the likes of Everton and Aston Villa in the EPL). The SPL may have a difficult time getting anything close to this deal.

There are other factors that come into the SPL deal and apply to Setanta's other contracts as well. For one, the economy's gone in the tank since the last round of deals was negotiated. At that time, there was a prominent belief that the value of soccer TV rights would continue to rise indefinitely, given increasing global demand and expansion into new markets. That led to a bidding war for many hot properties and probably convinced broadcasters to spend more on them than they could make back from ad sales and subscription revenues at the moment, rationalizing that they could recoup their losses in the long rung. The values of these rights may again climb in the future, but they appear to be overvalued at the moment.

Moreover, Setanta's entry into the market was a key element in the the magnitude of the last deals. It's a simple economic principle that more competition for a resource tends to increase the price of that resource, especially when the supply is limited, which is very much the case with top-tier soccer. When that competition diminishes, the price of that resource falls because you can't play competitors against each other in an attempt to make more money. This is especially true if Setanta is to go off the air altogether, given the tremendous volume of soccer it shows. Sports channels obviously can't show more than 24 hours of programming per day, so if Setanta disappears altogether, its games couldn't be picked up by an existing channel without affecting their own programming schedule. Now, other channels are almost certain to be willing to do that for the more desirable properties that were on Setanta, such as the EPL, but they may not be willing to pony up as much money before. However, some of the second-tier leagues, like the SPL and the French Ligue 1, may have a more difficult time finding a home at all. The BBC already made it clear in the Times article that they're not interested in getting back into SPL coverage. Given how dependent leagues have become on TV money and the increasing numbers of clubs entering financial difficulties, this could dramatically affect soccer as we know it in Europe.

This could have some troubling implications for North American soccer viewers as well. It's unclear how the parent company's problems will affect their North American subsidiaries, but you can bet that the effects probably won't be positive. In the U.S., Setanta shows plenty of EPL action as well as top-tier stuff from other European leagues. In Canada, they are one of the main EPL broadcasters (along with usually one live game a week on The Score and one on Rogers Sportsnet) recently won the rights [EPL Talk] to show the UEFA Champions League for the next three years along with Sportsnet. There's a lot of speculation flying around that ESPN may pick up some of Setanta's packages, particularly the EPL ones.

It's not clear yet exactly how that would work, but that shouldn't keep us from considering the possibilities if ESPN does make a move for Setanta or some of its rights packages. In the U.S., I'd imagine that much of the EPL coverage might get bumped to ESPN2, especially in the fall when Saturdays are all about college football and Sunday is about extensive NFL pre-game shows; both are ratings bonanzas. The EPL has a dramatically growing audience stateside, but I don't think it's enough to dethrone either form of American football. That isn't necessarily a bad thing, as ESPN2 doesn't require anywhere near as hefty of a subscription fee as Setanta and large numbers of households have it.

The Canadian scenario is far more troubling if TSN, ESPN's Canadian counterpart, were to follow suit with a play for EPL rights. TSN generally does a poor job of covering soccer; they've had UEFA Champions League packages for ages, but bump the games for such activities as curling whenever they get the chance (as an aside, I'm quite sure that Canada is the only country in the world where curling would ever take precedence over the Champions League). If they did manage to land EPL rights, they might continue to drop the games whenever possible in favour of some obscure sport. That's not necessarily a shot at them, as TSN has a ton of properties as it is, and making room for them all can be very challenging. I don't think they would be a good home for the EPL, though.

However, things may not change all that much on the EPL front here. According to this 2007 Globe and Mail piece by William Houston quoted at the forums (bottom of the page), it's The Score that actually controls the Canadian EPL rights; Setanta and Sportsnet licensed them from them. Thus, they would be able to either increase their own EPL coverage or farm it out to someone else, and there are a variety of interesting options here; we could see Sportsnet return to three EPL games on Sunday, GOLTV pick up some EPL action or Fox Sports World Canada get in on the fun. Also, Rogers apparently holds a partial interest in Setanta Canada; I could see them perhaps taking over the Canadian channel themselves as well and continuing the existing deal with The Score. That might work well, as most of the other alternatives would likely lead to less EPL games being shown thanks to pre-existing programming demands. It will be interesting to watch and see what happens with this going forward.

[Cross-posted to The 24th Minute]

Update: 3:05 P.M., June 10: Just found this piece from the guys at Full-Time: Vancouver's Soccer Show. Apparently, Setanta Canada will operate as is for at least the 2009-2010 season, as it's a separate concern (partly thanks to Rogers' investment). They'll be talking to Setanta Canada marketing manager Andy Shapiera on the show this coming Sunday; should be an interesting interview.

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