• Monday, May 27, 2024
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BusinessDay

Setanta collapse : lessons for Nigeria pay TV operators (II)

English Football League (EFL)

TOJU EGBEBI

It gave them the right to show 46 matches annually for three seasons from 2007/08 to 2009/10. It was made possible by the decision of the European which ruled that for competition reasons, no broadcaster could own all the six domestic Premier League packages in England. That decision brought an end to Sky’s monopoly and allowed Setanta in. Unfortunately for Setanta the financial sums involved had changed.
The subscriber numbers refused to add up too. The company had paid experts and industry watchers would say overpaid for the rights of the major football matches it won. It required at least 1.9 million subscribers to break even; it was able to acquire only 1.2million. And so the death knell was sounded long before the next round of bidding for the rights to the football matches in its kitty. The stratospheric rise started bottoming, in fact going south. In a matter of days, we will know whether the company would go into administration or find some benevolent investors. But at this stage, it is pertinent to ask: what went wrong?
Many factors could be adduced for the sudden collapse of the shining star in cable television broadcasting, but none had a more devastating effect than overpaying for rights to football matches. And it is in the English Premiership that Setanta was made to eat humble pie. It paid a lot of money for the Scottish Premier League, a content which was free until Setanta came along, and one which was not attractive enough to attract subscriptions and drive up subscription numbers. It also overpaid for some matches of the English Football Association Cup; English national team away matches; and some English national team friendly matches. Now who wants to pay for watching friendly matches? In many ways than one, Setanta overreached itself.
A second factor, which is closely related to the first, is what could be referred to as the me too syndrome. Setanta felt that the only way it could compete for subscribers was to go headlong against the entrenched pay television operators who had been in operations several years before Setanta launched its service. It did not want to wait to develop its programme bouquet over time, but to cash in on already developed content to drive subscriber numbers. There is a high price for this, which is what Setanta is paying at the moment.

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Thirdly, after securing the Premiership rights, Setanta received in excess N83billion from private equity investors. The company was attractive, and at that stage, seemed as if it was going to compete strongly with the established operators, and perhaps become the dominant content provider. Many of the rights Setanta won were for three-year periods, and for it to be profitable over the horizon, it must keep these rights, and add more, so as to keep growing subscriber numbers. The private equity investors had a three-five year investment horizon. Pressures started mounting on Setanta to deliver. This it could not do with 1.2million subscribers. The business model that once looked very attractive was now looking stale. Pay television needs longer than five years to be able to consolidate their business. Setanta did not have the luxury of that length of time.
The last that was heard from the saga was that a few organisations are looking at investing in Setanta; one offered N4.7billion (£20m), another an unspecified figure. If the investments are not significant enough to cover the N7.7billion owed both the English Premier League and the Scottish Premier League, the rights will revert to the owners, thereby making Setanta even less of an attractive prospect. The worst case scenario will see other cable television operators cherry-picking the rights once owned by Setanta.
With the spectacular fall of Setanta from its perch, does it signify that only a few operators will continue to dominate service provision? What lessons can Nigerians learn from this saga? Are there similarities between Setanta’s rise and the new dynamics in cable television in Nigeria?
To the last question, it is an emphatic yes. Before now, rights to most of the sought after content on cable television resided with Multichoice Nigeria. This included the Spanish, English, German Leagues, in addition to many other leagues and football content. But Entertainment Television, popularly called Hitv came along and challenged the dominance of Multichoice, especially in the right to transmit matches of the English Premier League. There was intense bid for the rights and Hitv won after bidding N6.6billion to carry the tranche A matches for three years. At the time this happened, it was seen as too high, but justified on the ground that football is the main driver of signing up cable television subscribers in Nigeria. It was the same justification Setanta made for the crazy bids it placed.
Recently, it was announced that Hitv has, in addition to its rights to the English Premier League, won the rights to broadcast the UEFA Champions League starting from next season. The cable operator was reported to have paid a colossal N15billion ($US100m) for a three year period, translating into N5billion per year!
The acquisition of these rights are based on the logic that ownership of the premium football content Nigerians want to watch would drive traffic to the service of the rights owners. It is a good business strategy if research has shown that the majority of people that can afford to access cable television programmes prefer to watch football; other content are simply icing on the cake.
But knowing how unreliable researches in Nigeria are, especially because of the inability of researchers to penetrate the informal sector to gather data, that business strategy may be flawed. Most data do not capture activities below a certain level. That is why making projections is not an easy task for businesses in the country. It equally explains why, in spite of losing the rights to broadcast tranche A matches of the English Premiership, Multichoice subscription numbers are growing month on month.
But that does not remove from the fact that the acquisition of the football rights has contributed, and will continue to contribute, to the growth of Hitv. But without a corresponding growth in the number of subscribers that want other programming aside football, then it is a business model that is aped along the line of Setanta. Rights to premium football content are acquired, most times overpaid for, hoping to use that to attract subscribers and that with time, other programmes will be added to cater for viewers that hold no truck for football. It does not work, and Nigeria can be no different.