The calling in of Administrators Deloitte by the UK arm of Setanta came as no surprise. The question had long been ‘when?’ rather than if ‘if?’. The precise implications of the collapse are less predictable however, and will only become clearer in the next few days and weeks.
The sport which will be potentially the most effected is of course football, where Setanta UK held four different bundles. The ‘jewel in the crown’ for Setanta was the set of 46 Premier League games, which Disney-backed ESPN has already bought, for, it is believed, the same sum that Setanta paid. This might suggest that the other rights packages will be picked up in a similar way, but that would be misleading. They are arguably the only part of Setanta’s rights which were bought at the right price.
In the case of its Scottish Premier League matches, it seems clear that Setanta were over-optimistic in their bid. It is likely that they will be resold at a lower price, a drop of roughly 30% being probable. The SPL is in an unusually good position to take a hit having just announced record profits of £23 million (1), and have already made moves to support their member clubs. However, their member clubs are all in individual financial positions and the impact on them will depend on their particular circumstances. Hardest hit will be the smaller clubs and the clubs which are already struggling financially – Hearts made a loss last year (2); Rangers have increased their net debt (3); Kilmarnock are not currently in a strong financial position (4); and this will hardly be good news for newly promoted St Johnstone. Aberdeen have already indicated that a direct impact is that they do not plan to participate in the summer transfer window (5).
The FA bundle is a very mixed bag. The full internationals should prove attractive and the FA should have no difficulty in selling them at a good price, and the same will apply to the FA Cup. The attractiveness begins to lessen though when it comes to the Community Shield and the under-21 matches. Alternative broadcasters will want to cherry pick and are in a position of ‘buyer power’ if they hold their nerve.
The final football bundle is for Blue Square Conference matches. Although of much lower value, they are a significant source of income to the clubs involved. For Conference National teams the income was between £75,000 and £100,000; for clubs in the lower North and South divisions, it was £15,000 a year. For these clubs it might prove a make-or-break figure. Conference clubs are highly individual in the way they are run and in their financial stability. Those that are currently struggling financially – these, in my opinion, include Northwich Victoria, Stafford Rangers, Lewes and Weymouth – will be rushing to update their Plan B, that is assuming they have one. It is at this level in the football pyramid clubs are inherently most vulnerable and we can expect to see more cases of Administration, which will no doubt be blamed on the collapse of Setanta. This will be at least a tad misleading.
Kidderminster Harriers Chairman Barry Norgrove has expressed concern on the impact the collapse will have on Conference clubs (6). He also said “The Premier League have a new deal and I think they should filter some of that down through the leagues.”
“With Setanta going into administration it’s going to be very difficult for a lot of clubs in our league because the finances won’t be there to pay the budget,” he pointed out (7).
If the collapse of Setanta UK did come as no surprise to chairmen of Conferernce clubs, they will have already had their Plan Bs prepared, and made signings, or rather not made them, as necessary. After all, the transfer window did not open until 15th May, and by then Setanta was already being reported as in trouble.
There are obvious parallels with the collapse of ITV Digital in 2002, which a number clubs held responsible for their insolvency. A scratch below the surface reveals that not only was the number of cases of clubs going into Administration already on the rise – it had been rising since 2000 (8) – but a look at the debts of those clubs shows that the loss in income from ITV Digital may have been the straw that broke the camel’s back, but it was certainly not the primary cause.
The clubs who are vulnerable are, as ever, the weaker and smaller ones. They have been hit in a time of general recession. So far the richer clubs have proved fairly resilient to the recession, but the collapse of Setanta will only serve to emphasise the ever-growing disparity of affluence across the tiers of professional football.
In the last eight weeks we have seen these eight insolvency events – Stockport County (League Division 2) into Administration, Gresley Rovers (Northern Premier League Division 1 South) wound up, Fisher Athletic (Conference South) wound up, Darwen (North West Counties League Division 1) wound up, Northwich Victoria (Conference National) into Administration again, Chester City (League Division 2) into voluntary Administration, AFC Hornchurch (Isthmian League Premier Division) fold, and Merthyr Tydfil (Southern League Premier Division) into Administration, and all of this since Southampton (Championship) called the Administrators in to their parent company. The collapse of Setanta UK can only result in additions to this pattern through back-breaking straws. Setanta will take more than its fair share of blame however.