Darroch: Setanta Tried To Grow Too Quickly

Speaking at the inaugural Sport Industry Breakfast, Jeremy Darroch, chief executive of Sky, told industry executives that financially troubled pay-TV rival Setanta erred in trying to grow its business too quickly as opposed to opting for a long-term strategy.

Speaking to an exclusive group of sport business executives, a diplomatic Darroch stated his belief that in hindsight Setanta made some errors paying out substantial fees for sports rights that were not considered top-tier in an effort to propel its business forward more quickly.

The Sky chief executive was quick to point out however that Setanta’s customer acquisition rate had been healthy but a combination of the excessive rights payments and the timing of the recession had led to its current perilous financial position.

He also added that it had taken Sky five years before it reached profitability indicating that a long-term approach was the most effective way of delivering a sustainable pay-TV broadcasting business.

Darroch expressed his belief that Sky’s success over the last 20 years had stemmed from its desire to be at the heart of the sport industry by investing in the sports themselves.

Setanta defaulted on a £3m rights payment to the Scottish Premier League earlier this week and its board has held last-ditch meetings this week to try and save the company with administration a very real possibility.

Accountants Deloitte are reported to be on standby to take over as the private equity-owned business struggles to close a funding gap of nearly £50m.

When quizzed on whether it would be in Sky’s best interests for its primary pay-TV rival to fold, Darroch simply replied that sports broadcasting is a competitive business and that he fully expected new rivals to appear, potentially in the form of US broadcaster ESPN, in Setanta’s absence.

Setanta has one season left on its three-year, £392m deal with the FA Premier League, with a new £159m three-year deal to follow after that. It also holds rights to show some FA Cup and England games, bought for £150m in a four-year deal.

In a all-encompassing question and answer session with industry executives, Darroch also touched on issues such as the effect of online piracy on broadcasters and the future of the Listed Events ruling – a legislation that is currently under review from an independent panel as to whether certain sporting crown jewels should continue to be protected from being televised on the smaller audience of pay-TV channels compared to their terrestrial rivals.

Sky believes sport governing bodies should be allowed to make their own decisions to maximise the value of their TV rights, free of political interference.

Darroch said that many sports bodies, such as the International Olympic Committee and Wimbledon, would choose free-to-air broadcasters regardless of whether pay-TV broadcasters such as Sky were allowed to bid for the rights.

He stated: ‘There is no need for a major sporting event to be listed in order for it to feature on free to air television – just look at Formula 1, Six Nations rugby or Premier League highlights for proof.

The Sky chief executive also defended the England and Wales Cricket Board’s decision to sell the exclusive live TV rights to this summer’s Ashes to the pay-TV broadcaster.

He added: ‘ITV and Channel 4 have made clear that they don’t see cricket as part of their programming mix. And the BBC has been ambivalent at best in its interest in cricket, preferring to invest elsewhere instead, most recently in Formula One. So when you hear people call for Test cricket to be put back on the list of sporting events reserved for free-to-air television, think hard about the potential consequences of restricting competition for rights.’

Sky has today submitted its official views to the Listed Events review panel arguing that the existing policy reduces competition for media rights.

‘Listing a sporting event against the wishes of the sports body responsible for it removes that freedom of choice and places a key decision in the running of the sport into the hands of government,’ BSkyB said in its submission to the Department of Culture, Media and Sport.

‘Listing an event against the wishes of a sports body means that it becomes a forced seller of its rights and denies it the ability to get a fair deal from its chosen broadcast partners. This amounts to a tax on sport to subsidise terrestrial broadcasters, at a time when sports are in need of greater levels of funding in order to invest in facilities and in their grassroots, and face pressure from the Government to increase levels of participation.’