Setanta Sports in trouble?

Article in todays Guardian speculating that Setanta will have to scale back spending on sports such as football and boxing.

Doesn't bode well for the future of boxing on out TVs if this proves to be the case.

'A raft of major sports including football, boxing and rugby face an uncertain financial future after it emerged that the pay-TV broadcaster Setanta is likely to be forced into drastically scaling back its ambitions.The company is engaged in a wide–ranging strategic review in the wake of last week's Premier League rights auction, when it retained only one package of 23 live games from 2010. While seeking to play down speculation of a crisis, Setanta insiders yesterday conceded that it will have to cut costs severely and downsize if it is unable to regain the rights to the Premier League games it has lost.
That, in turn, will lead its investors to question their continuing funding of the business. And it would leave those sports yet to negotiate long-term contracts without any competition in the market.
As revealed by the Guardian yesterday, Setanta has approached the Premier League to discuss the possibility of reclaiming or sublicensing the Monday night matches it will lose from 2010. It is also poised to make fresh representations to the media regulator Ofcom and the European Commission, arguing that the process put in place to stimulate competition and choice in the marketplace has failed because Sky remains the dominant player. But those close to the process say its chances of success are slim.
BSkyB, which paid £1.62bn for 115 live games per season from 2010, would be wary of sublicensing the games to Setanta and such a deal would probably break competition rules in any case, while the Premier League will steadfastly refuse to unpick its carefully agreed deal with the European authorities.
Setanta may have more joy going down the regulatory route, but that is likely to take years rather than months. Ofcom is currently engaged in a review of the pay-TV market and last year said it was open to examining whether new constraints should be placed on the auction process, but that it would only do so once other proposed avenues had been exhausted.
Setanta's single package from last week's record-breaking £1.782bn deal for live domestic Premier League rights means that from 2010 it will pay £159m over three years compared to the £392m invested under the current deal, but will screen half as many matches. With 23 live games per season, fewer than one a week, it will find it hard to retain subscribers.
The broadcaster, which looked like a serious player when it paid £392m for Premier League rights under the current deal and a further £150m to the FA for FA Cup matches and England internationals, would have to scale back drastically. Setanta has retained an investment bank to raise new finance and is in talks with its private equity backers.
Insiders concede talks about the future of the business are continuing and that reshaping it as a "low-cost, low-*investment" player is the most likely option. Meanwhile, it is understood that serious divisions emerged among the Setanta board as their bidding strategy was discussed. Some of the investors, believing that the two packages of rights could be retained at a discount, were unwilling to sanction a blockbuster bid.
But the company's executives, several of whom formerly worked at Sky, wanted to be more aggressive. The real problem, said insiders, was that it was impossible to compete with the scale and depth of resources available to Sky.
Setanta currently has 1.5 million premium subscribers, paying up to £12.99 per month, but that figure is likely to plummet once it loses half its Premier League games. Analysts estimate it needs around 1.9 million subscribers to break even with its current cost base. Such is the importance of Premier League football in driving take-up that, without it, investors will be reluctant to fund rights deals in other sports as their chances of emerging with a profit dwindle.
As well as the Premier League and FA deals, Setanta has invested heavily in Premiership rugby, PGA Tour golf and high–profile boxing. If Setanta withdrew from the market, it would leave most sports contemplating smaller deals next time around. In its 2007 accounts, the most recent year for which figures are available, Setanta noted a £666.5m commitment to rights fees going forward.
The FA will also be keeping a close eye on proceedings. In 2007, it trumpeted a 42% rise in TV revenues after freezing the BBC and Sky out of the bidding process for the FA Cup and home England games. But with ITV's coverage the object of derision and Setanta's future unclear, the wisdom of that decision is bound to come under renewed scrutiny. The FA relies on TV revenues for a large part of its income and would be unlikely to command a similar figure if it had to return to the market.
Setanta's investors include venture capitalists Balderton Capital and Doughty Hanson and investment bank Goldman Sachs. Joint founders Michael O'Rourke and Leonard Ryan also retain a stake and it recently emerged that the Russian oligarch Len Blavatnik has a 3% share through his company Access Industries.