Media Analysis: Setanta pushes into Sky territory

diaspora into a major holder of global sports TV rights in the UK.

The origins of Setanta is the stuff of broadcasting legend. It was
started by two Irish ex-pats based in London frustrated at their
inability to watch the Republic of Ireland take on Holland in the 1990
football World Cup on TV. They persuaded FIFA to sell them the rights to
a feed of the game, hired out their local pub to show it and charged
Ireland fans £5 each to watch it.

Seventeen years on, Setanta is a very different outfit, with rather
higher stakes than attracting enough viewers to fill the back room of a
pub. It operates nine digital channels and owns the rights to show PGA
Golf tournaments and rugby union's Magners League games, as well as
European football, including matches in the Scottish Premier League
(SPL) and Germany's Bundesliga.

Price hike

Last month, in partnership with ITV, Setanta made an audacious and
successful £425m bid for the television rights to the England
football team's home fixtures and FA Cup games. The deal, which cost 42%
more than the FA's previous agreement with the BBC and Sky, follows
Setanta's success in securing a £392m deal last summer for
exclusive rights to 46 Barclays Premiership games; from next season,
this will break Sky's stranglehold on the league.

The bid was something of a PR coup for ITV, especially for executive
chairman Michael Grade, who has been evangelising about reinventing the
broadcaster's output since taking up his role last November. Moreover,
it will effectively leave his former employer, the BBC, without any live
football rights.

As well as hoping that it will lay to rest the ghosts of ITV's last
foray into football rights, which formed part of its disastrous ITV
Digital venture, Grade must also be willing the TV ad market to bounce
back to justify the spend.

However, the risk for Setanta is far greater. The strategy of securing
exclusive sports rights to drive subscriptions - its primary revenue
stream - means its tanks are now firmly positioned on what has
traditionally been Sky's lawn.

The marketing challenge for Setanta is considerable. It has announced
that it aims to have 1m subscribers by the end of the year and 1.9m by
December 2009, and claims that Ryan will be given a £20m marketing
budget to achieve this.

According to Universal McCann, Setanta currently has just 250,000
subscribers, most of whom are in Scotland, having been attracted by its
SPL coverage. This compares with the 5.5m signed up to Sky's sports
channels.

The first tranche of marketing activity, which kicks off in July, will
focus on Setanta's English Premiership coverage, supplemented by a price
promotion. There are also plans to launch a Setanta-branded Freeview
box.

Setanta's presence on Freeview, via 'subscription-lite' service Top Up
TV, is a key advantage over Sky. It is the only sports service available
on the platform, though there are rumours that Sky is to launch its own
Freeview offering.

Setanta will offer a highlights channel for £9.99 a month on
Freeview and to broadband customers, while Sky and Virgin Media users
will have to pay £14.99 for the full Setanta package.

Setanta is also in talks with BT Vision and Tiscali to make its service
available to their subscribers and plans to expand its out-of-home pub
TV service to a potential 39,000 pubs and clubs.

Ad sales offensive

Although ad revenue is viewed as a secondary revenue stream for Setanta,
in February it hired Mark Taylor, a former sales director of the
Hallmark Channel and well-known face on the broadcasting circuit, as its
first sales chief.

Taylor and representatives from Setanta's sales operation, IDS, have
since been touring media agencies to lay out the Setanta stall. So far,
TV buyers seem impressed, as it presents an alternative to Sky, which
sells spots in its sports coverage at a hefty premium.

'It's fantastic,' says Paul Benson, deputy broadcast director at
Universal McCann. 'More competition can only be a good thing. I firmly
believe that it will be good for the game, and for the advertisers there
should be a lower entry point.'

That it will be cheaper to buy into sports coverage on Setanta is
confirmed by Martin Plant, executive sales director at IDS, which is
currently looking to sign a headline sponsor for Setanta's football
offering.

However, Benson has reservations about Setanta's ability to procure an
additional £15 a month from sports fans who are already signed up
to Sky's dedicated services. 'They are extremely ambitious plans', he
says.

Taylor is understandably confident Setanta will be able to attract new
advertisers to football. He is placing particular emphasis on brands in
the gaming sector at present, though he says the broadcaster's sales
policy has yet to be finalised.

He also plans to extend the Setanta brand onto mobile platforms as well
as into publishing, which will present additional commercial
opportunities.

For advertisers, any competition that challenges Sky's dominance of
sports coverage and challenges its ability to charge a premium is a
positive. The big question is whether Setanta's subscription targets are
achievable and whether it can reach the critical mass needed to threaten
Sky's stranglehold. It is up to Ryan to prove that they are.