Username:
Password: Code:
1 3 i u
  Forgot Password?   Sitemap  |  Register
Home About us Solutions Newsroom Forum Partners Article Helpdesk FAQ Contact Us
2011-09-07
ServiceVows launches

more

 
Read more...
image
 
News
2009-07-01:For pay TV operators, lessons from Setanta collapse

By Tope Templer Olaiya

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.

Setanta's big breakthrough came when it picked the right to two English Premier League packages. 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 football governing body, 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 it 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.

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. 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.

Incidentally, snippets of this phenomenon are already quite visible. During football off season, which is between late May and mid-August, the number of subscribers on Hitv that pay their subscriptions is reportedly less than 50% of registered subscribers. What this implies is that the other content on its bouquet are not attractive enough for subscribers to consider paying the monthly subscription, much unlike Multichoice, and indeed other cable television operators in other countries that have diverse programming for different segments of the population.

This singular fact foretells trouble for cable television businesses built on such straits. With its subscriber numbers not diversely spread, it follows that its appeal is largely limited to football loving Nigerians. Will the number of its subscribers sustain such huge payments for football rights?

Source: The Guardian

Back

 
   No comment Found.
----------------------------------------------------------------------------------------------------------
Add Comments *Please Login before Submit your Comments
 
 
 
 
 
 
Google
 
Web www.servicevows.com
 
Copyright @ 2009 Servicevows Solutions Inc. All rights reserved. Privacy Statement.   Terms of Services