Scottish football managed to survive — just about — before the subscription broadcaster Setanta Sports first crossed the Irish Sea and opened its chequebook in 2003. Since then, the financing of the beautiful game has been transformed.
Not only did Setanta give Scottish premier league (SPL) clubs a welcome shot in the arm, in the shape of a new revenue stream that enabled them pay off some of the debt accumulated while the Bank of Scotland remained a football-friendly bank.
But also, in a renegotiation spearheaded by the SPL chief executive Lex Gold last July, the clubs also managed to more than double the amount Setanta pays for the rights to broadcast games.
The sum rose to £125m over the four-year period kicking off in 2010, compared with the current level of £55m.
However, that particular renegotiation is now looking less clever for the SPL. Having over-leveraged itself in the boom times, and suffering because of an iffy business model, Setanta may be about to go into administration.
This is despite the fact that the group’s private equity backers, Doughty Hanson and Goldman Sachs, recently installed new management led by the former Emap heavyweight Robin Miller.
Miller’s team is clinging to the hope that it will be able to raise an additional €100m either from existing or new shareholders. But existing shareholders are unlikely to throw more money Setanta’s way unless it manages to renegotiate — downwards — the contracts it has with rights holders such as the SPL.
This puts the SPL in a bind. If it plays too rough, it is likely to tip Setanta over the edge and end up even more impoverished than if the broadcaster renegotiates its contract.
There may be lessons from the collapse of ITV Digital. (Remember those ridiculous knitted monkeys?)
Back in March 2002, the English Football League refused to accept a £130m cut in its £315m deal with ITV Digital’s sports channel. As a consequence, ITV Digital went to the wall. Even after protracted legal action, the clubs ended up with virtually nothing in compensation. Several were forced into administration.
Professor Tom Cannon, a football finance expert at Buckingham University, believes that SPL needs to be more pragmatic. He said it would be unwise of the league — which was last week obliged to dip into reserves to make a £3m payment that ought to have come from the broadcaster to the clubs — to be too tough with Setanta at this juncture. “I think it’s in the SPL’s interests to keep Setanta in business, as nobody else is going to come in and pick up that contract,” he said.
The problem for the SPL is that there is no queue of rival broadcasters waiting to rush in and compete. Were, for example, a rival broadcaster such as Sky — which is 39.1% owned by News Corporation, parent of The Sunday Times — to be waiting in the wings, then at least the SPL would be in a stronger negotiating position. But, according to Cannon, it isn’t. There are also competition concerns.
Nor does Cannon believe it would be in the SPL’s interests to allow Setanta to go bust and then look to secure a deal with Sky: “I suspect that they wouldn’t get a better deal out of Sky than they would get out of a Setanta that they helped to survive.” Having been rescued by Setanta earlier this decade, perhaps it’s time for Scottish football to return the favour?
Glorying in the past
One sometimes wonders on which planet members of the Financial Services Advisory Board (FiSAB) reside.
Last week, the joint industry and government body charged with looking after the interests of Scotland’s financial services sector came out with some misleading jobs figures for its industry, dating from 2007 — when the number in employment would have been at its highest, just as the credit cycle peaked.
Maybe FiSAB, which was firmly in “harping back to past glories” mode, wanted to airbrush away the harsh reality that there have been at least 4,500 redundancies in its sector in recent months, with more job losses expected, and that Scotland’s reputation for financial prudence has been shattered by the recklessness of the likes of HBOS, now owned by Lloyds Banking Group.
Shouldn’t FiSAB be focusing on these issues? Its head-in-the-sand approach suggests it is no longer fit for purpose.
New round in drink fight
Kenny MacAskill, Scotland’s justice minister, and Nicola Sturgeon, health minister, are adamant that irresponsible drinking must be tackled and irresponsible marketing and pricing stopped.
Last week, however, a London-based think-tank, the Centre for Economics and Business Research, fired a warning shot across their bows. Ben Read, its managing economist and the author of a report into minimum pricing, said: “Our findings raise serious questions about the robustness of the Scottish government’s evidence base for minimum pricing.”
The Scottish Government seems undaunted. The drinks trade needs stronger tactics if it is to resist MacAskill and Sturgeon’s crusade, but it risks being pilloried for putting profit before health.
This Scottish Agenda column was published in The Sunday Times on 7 June 2009