Marketing

D-Day For Setanta Sports

Today is the deadline for Setanta to pay the Premier League monies outstanding. While there has been much written about the problems at Setanta, if the company gets through this difficult period there are still long term issues that could threaten its survival.

To put it in perspective, Setanta’s offer to Sky for the sale of its Premier League rights was never going to happen. That was the last roll of the dice for Setanta. Sky is a company that is openly hostile towards competitors, and will, in its own long term interest happily bite its nose to spite its face.

In 2007 Sky removed its channels from Virgin Media’s cable TV service in a dispute over money. Virgin pay Sky a fee to carry Sky’s channels on the Virgin cable TV service in the UK. While Virgin were, on the one hand, trying to compete with Sky as a Digital TV platform, launching its own channels, the self titled ‘Virgin’ channel (they already owned Living, Bravo and half of the UKTV network amongst others). Sky increased the money it wanted for carriage, Virgin said it was too much and Sky withdrew its channels rom Virgin. Losing out on carriage revenue and advertising revenue as key shows such as Lost, did just that and lost 33% of its audience. Sky reinstated its channels only after 20 months, a threat of legal action and an undiscolsed agreement between the firms.

So to ask Sky to ‘bailout’ a competitor was never a realistic option. Plus if you let Setanta go to the wall, the TV rights will go out to tender and what broadcaster will be at the top of the queue?

But beyond this current situation there are big problems for Setanta. The reliance on UK football being the key issue. Fans will go where the action is and from the 2010 season Setanta only have 1 of the lower tier TV rights to the Premier League (it currently has 2). Sky have the other 5 from 2010. How many of its subscribers are there for the football, and how many will bother with it if it has less matches.

American sports giant ESPN are known to be interested in entering the market, and with them will come the buying power to rival Sky’s future ownership of the upper tier TV rights packages.

TV rights are not original content unique to the broadcaster. Because of their transient nature any broadcaster could theoretically own them and years spent building up an audience could be destroyed with one wrong bid. Perhaps this was an issue Murdoch was addressing in 1999 when he put in a bid to buy Manchester United – and eventually move towards teams selling their own rights direct.

What are Setanta’s options?

To become less reliant on revenue from football because, if Setanta does not have the purchasing power to compete in the bidding for TV football rights for the 2013 – 2016 season, they will be out bid by Sky and any other competitor that may enter the market (possibly ESPN).

Become a ‘challenger brand‘ and don’t position as a Sky wannabe. Setanta is a weaker rival, but smaller firms can outplay their dominant competitor through creativity and imagination. Allow marketing to build the firms unique intangible assets, as these cannot be as easily purchased or created by rivals. By intangibles I mean reputation, copyrighted material and customer satisfaction.

Going in Setanta’s favour is the UK Office of Communications (Ofcom) eventually getting around to publishing their report into the UK Pay TV sector, which will find in favour of the smaller broadcasters (Virgin, Setanta and BT). This may see an alteration in the favour of Setanta (or certainly away from Sky). Currently of the 6 TV rights packages for the Premier League no one broadcaster can own all 6, but one broadcaster can own 5. In the case of Sky they have never lost grip on the 4 upper tier rights packages giving them access to the majority key matches in a season.

However, will all this talk of a new regulatory system for premium content on Pay TV be too little too late for Setanta? Hopefully not

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© 2009 LAB: Luke Abbotts Blog.