Setanta scores with dish debut

A small Irish broadcaster looks set to join the big leagues, reports Fortune's Matt Boyle.

By Matthew Boyle, Fortune writer

NEW YORK (Fortune) -- Setanta, a small Irish broadcaster, took another step towards joining the big leagues by signing a deal with EchoStar Communications' (Charts, Fortune 500) Dish Network to carry its 24-hour digital sports channel, Fortune has learned.

Beginning August 1, Dish Network's 13.4 million subscribers will be able to watch English soccer (including live Premiership matches), rugby and other international sports in a deal that will almost double Setanta's potential penetration in U.S. homes. Financial terms of the deal were not disclosed. Dish's satellite rival DirecTV (Charts, Fortune 500) already offers Setanta on an a la carte basis to its 16 million customers for $14.99 a month.

If you're wondering "What the heck is Setanta?" you're not alone. Save for the bleary-eyed English and Irish ex-pats in America who cram themselves into pubs on weekend mornings to watch Setanta's live broadcasts of big European soccer matches, privately-held Setanta barely registers on the sporting landscape here in the United States. But that might soon change, especially if America's on-again, off-again relationship with soccer heats up thanks to David Beckham's arrival in Los Angeles.

And even if soccer remains on the periphery here, Setanta's burgeoning presence across the pond in Britain - where it helped break Rupert Murdoch's stranglehold on live coverage of Premiership matches - and its blue-chip backing by Goldman Sachs and Benchmark Capital ensure that the broadcaster, whose name means "the little one" in Gaelic, should continue to punch above its weight.

Challenging Murdoch's British Sky Broadcasting was probably the last thing on the minds of Leonard Ryan and Michael O'Rourke when, in the summer of 1990, the two Irishmen rented out a club in London's Ealing neighborhood in order to watch their beloved national soccer team play the Dutch in the World Cup. As the game was not available on English television, the lads took matters into their own hands, charging close to 1,000 fans 10 pounds each to watch their jerry-rigged satellite feed.

"We were just friends who wanted to see a football match," recalls Ryan, who was 22 at the time and working for an insurance company. "We lost about 5,000 pounds doing it, but it showed us that there was a market for displaced sports fans."

The founders grew their nascent business by catering to that market - showing Gaelic sports to Irish fans in pubs across Europe, then soccer matches to Brits in the United States. In 2000, Setanta moved beyond bars by offering the European soccer championships on a pay-per-view basis to American homes via Dish and DirecTV.

"There were some hairy times early on," Ryan recalls. "We took some big gambles." One such gamble was outbidding the BBC for rights to broadcast Scotland's top soccer league in 2004. "We put the whole company on the line for that," Ryan says.

Then, last year, came twin coups - breaking Sky's monopoly on live Premiership matches by paying over $700 million for the rights to 46 games each season for the next three years. (The 2007-2008 Premiership season begins August 11.) Setanta also secured the final tranche of 400 million pounds in funding from a consortium that includes Goldman Sachs and venture capital firm Benchmark.

"As a group, no one company, including Sky, has such a wealth of experience in the UK sports market," says Ynon Kreiz, Benchmark's point man on the deal. For example, Trevor East, Setanta's director of sport and a former senior executive at Sky, has over 30 years of experience in the industry.

Setanta's war chest will go largely to beefing up its operations outside the United States - it broadcasts in close to 20 countries and is the number-two sports broadcaster in Britain, with nine separate channels covering various European soccer leagues, PGA golf, auto racing, English horseracing and other events. Ryan hopes that Setanta's enhanced content and distribution will boost the network's UK subscriber base to one million by the end of the year, up considerably from the current 350,000.

Meanwhile, in the United States, the next big step is cutting a distribution deal with a big cable system like Comcast (Charts), Charter or Time Warner (Charts, Fortune 500). "Eventually, it has to happen," says Benchmark's Kreiz, whose favorite soccer team is Manchester United. No deal is in place yet, but look for cable systems to test the waters with pay-per-view offerings in soccer-mad markets like Chicago and New England first.

Setanta, which employs 300 and should double its 2006 revenue figure of 75 million euros this year, has also boosted its profile by sponsoring the USA Rugby team. Setanta's U.S. CEO Roger Hall says a similar deal in the soccer world is possible. What else is on the horizon? Perhaps live cricket, which is "the big unknown for us," says Hall. "It's a big sport worldwide, but that's a lot of hours [to broadcast]."

Cricket in America? An unlikely pairing for sure, but then, few would have ever thought that David Beckham would ply his trade on American turf. Top of page