• Tuesday, May 21, 2024
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BusinessDay

Setanta collapse : lessons for Nigeria pay TV operators

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Toju Egbebi

It is almost impossible to believe, but for the steady stream of news on the internet, it would have been termed a hoax. Setanta, that aggressive upstart that was held up as a good example of how to break digital cable television monopolies, stand up to entrenched interests, and give subscribers wide range choices, is suddenly going the way that has long been predicted it would go. If it fails to stump up the N7.7billion (£33million – £30m payment to the English Premier and £3m to the Scottish Premier Leagues), it will lose its most valuable rights and the company would likely go into administration.
Administration is a catastrophic end, similar to a pill administered to a dying patient to quicken the process of dying. When a company goes into administration, its assets will be stripped and sold piecemeal so as to earn money to pay off liabilities. In many cases, the money earned from stripping assets is never enough to liquidate the liabilities. The shareholders and staff lose big time.
And in the case of Setanta, its shareholders that have invested well over N93.4billion (£400m) since its inception will lose all their money. The over 500 staff spread in about seven countries will lose their jobs. Subscribers will also lose their money, in addition to not being able to watch their favourite programmes until the rights are taken up by another broadcaster, in which case they will lose on three fronts. Clubs that have come to increasingly depend on television money for funding will be badly hit.
Already, the Scottish Premier League where money from Setanta makes up about one third of total revenue will likely stutter next season, with the possibility of a few clubs following Setanta into administration. Even clubs such as Arsenal that are conservative when it comes to spending big will take a hit from the collapse of Setanta because the broadcaster owns the right to Arsenal TV. The English Club would have based its performance next season partly on the income expected from Setanta. Football associations that equally depend on money from broadcasters like Setanta will see their income dip, and they will no longer be able to meet some of their obligations. It goes on and on, with the repercussions wide and far-reaching.

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How come a business model held up as the ideal only a few months ago has had its bottom removed suddenly? Opinions from Britain, the home country of Setanta will help guide our understanding of the issue. But first is how Setanta became a household name within a few years of its existence.
About two decades ago Setanta began in an Irish club in west London, showing the Republic of Ireland’s 1990 World Cup game against Holland after the BBC and ITV declined to broadcast the game in Britain. It cost N2,335 (£10) to watch the match. Setanta’s Irish founders, Michael O’Rourke and Leonard Ryan, managed to break even after 1,000 Irish fans turned up to watch the game.
Nineteen years later, Setanta was a company transformed. It had expanded gradually at first, and then grown rapidly from 2004 onwards. It acquired major sporting rights not only for football tournaments, but golf, horse racing, rugby union, cricket and boxing. Along the way it changed itself from a niche broadcaster providing Irish and Gaelic sport, to a rival for Sky whenever major sports rights came up for grabs. Setanta’s big breakthrough came when it picked the right to two English Premier League packages.