IPL: How Star pipped Sony? What next?

Indian Premier League (IPL) celebrated its 10th birthday with Rs.16, 347.5 crores. The recently concluded auction of media rights to the Rupert Murdoch-controlled Star India in all seven global territories, Indian television and world-wide digital rights has bought cheers both for BCCI and Star India. Star India was waiting for over 10-years for IPL and grabbed it like the hungry lion in the jungle – the entire pie. This post is a brief discussion on the revenue stream and the market scenario after the purchase of IPL rights by Star India piping incumbents Sony Pictures Network India.

 

IPL

IPL Media rights just changed hands

 

How it fared

 

The table tells it all

Type of Rights

(In Rs. Crores)

Star India Sony Pictures Network Facebook Jio Airtel
Television (India) 6196.54 11050
Digital (World-wide) 1443 3900 3075 3280
Rest of the World 242.93
Total 7882.47 11050 3900 3075 3280

Source: – ESPNCricinfo

The consolidated bid of Star India was Rs.16, 347.5 crore (107% higher than the sum of individual bids by Star India) was mere Rs.527 crore higher than the sum of highest bids across all sectors (i.e., SPN + Facebook + other bidders (including Star India for UK rights)) at Rs.15819.51 crore.

 

Digital Vertical

 

While Hotstar gained a lot of benefit due to IPL digital right during its launch in 2015, thereby making Hotstar a popular digital platform in India. With Hotstar Premium a success, Star India has reaped multi-fold of its investment of Rs.300 crore in 2015 for right between 2015- 17. It recently clocked Rs.200 crore from an IPL 2017 digital broadcast, thereby a good Return on Investment.

 

Star India therefore put a threefold increased bid on Digital rights at Rs.1443 crore but Facebook, Airtel and Jio put maximum bids beyond Rs.3000 crore for the next five years.

 

Ironically, the TV broadcasting incumbent (Sony Pictures Network) did not cast a bid for the Digital and the Rest of the World rights. SPN couldn’t forge an alliance with prospected bidders for the digital rights, thereby restricting their bid only to Indian TV broadcasting space.

 

How Star India sees itself in making profits from IPL

 

After winning the consolidated bid for IPL rights, Uday Shankar jokingly said to his employees, “After this bid, I don’t have money to take you guys out for lunch”. Jokes apart, Star India can expect revenue of Rs.18000-20000 crore over the next five years. With the balance sheet may be in the red for the first two years, over the span, the ROI would be good for the sports vertical of Star India.

 

Coming to the first source of revenue would be from the distribution network. With a virtual monopoly over cricketing rights, Star India can expect an increase in distribution revenue by about Rs.500 crore from the current levels of Rs.1000-1200 crore (according the ET) while Sony would have to part away from its revenue of Rs.2400 crore (including Ten Sports) due to loss of IPL rights. Secondly, with a marque of properties lined up, Star would have better bargaining rights with MSOs and DTH providers. Jawahar Goel of Dish TV has already expressed his opinion in the open against monopolizing of cricketing rights. With the industry under pressure and the recent Dish TV-Videocon D2h merger, things aren’t good for the smaller players in the market for its survival.

 

Facebook in its history never investing in content, their Rs.3900 crore bid even in a worst case scenario encourages about 70% of the total Returns on Investment. While Hotstar has made a stellar debut in India, to increase its footprint across the globe, the digital rights would be useful. With rights in developed markets like the US and UK, the digital rights are expected to benefit Star India. Until they develop the bandwidth for the same, they can go for licensing models in different markets across the globe to gain revenue and reduce bleeding in the initial years. With Jio and Airtel interested in the digital rights, licensing the rights would gain better leverage in the Indian markets too. Who knows, even Cricbuzz (Times Internet Limited) might start delayed feed of IPL matches under the licensing model (TIL was among the bidders for the Digital rights).

 

Rupert Murdoch’s large bouquet of channels under Fox Broadcasting would come handy to stream matches in Australia (IPL was not available for viewing in Australia — Stopped in 2010) and in developed markets like UK and US where pay-per-channel is way higher as compared to India. It costs on an average of $90 dollars in US for watching TV channels against India’s average of close to Rs.250. In these markets the gap between digital and TV is like iPhone 6 and iPhone 6S. Both the screens are the same which gives leverage to Star to launch its Premium offering across the globe.

 

With Star India paying BCCI Rs.54.5 crore per IPL match played, the ad-rates are bound to rise. With the current levels at Rs.6.25 lakh for 10-second spot, on an average at the current levels would be Rs.14.37 crore from one match, which isn’t even close to Rs.54.5 crore. With different types of feeds (SD, HD, Language and Digital), Star would be demanding up to Rs.12-15 lakh for a 10-second spot. While the biggies would continue to advertise, Star should make sure it doesn’t restrict IPL advertising to only top players. This would make it prone to changes in the market like May 2019 General elections where these biggies would prefer to advertise on news channels for election news coverage and possible shifting of IPL matches outside India would make time-zones another factor to consider. While Indian markets are beaming to new levels, Star must hope and keep the advertisers glued with new ad-rates which India has never witnessed.

 

IPL was a do-or-die situation for Star India as it would be only telecasting 13 matches in 2018 without IPL (Contract for BCCI broadcasting rights terminate in 2018). With IPL it has ensured 60 days of constant action for the next five years, thereby commanding over 50% of the total matches played by India or in Indian-subcontinent. With ICC World Cup in 2019, Star India would be on the winning side if it manages to get advertisers to buy inventory for ICC World Cup, India-hosted and away games and IPL which push the number of matches to 130. Star India if works out its advertising and licensing strategy well, it would break-even with IPL in 2021.

 

Market response on IPL bid

 

Star India and Sony Pictures Network India are not listed companies in the National Stock Exchange. These companies are privately owned as their parents in their home markets. While Zee TV stocks couldn’t be taken into consideration as it is doesn’t own a sports broadcasting vertical, Sun TV responded positively to the bid. Share prices of Sun TV at Rs.763 rose positively to Rs.830 on September 5th, thanks to the stake of Sun TV’s Sunrisers Hyderabad IPL franchise. The company has maintained a humongous market share in its home market, was bleeding in its IPL team venture. Except for Kolkata Knight Riders, all IPL teams were fighting tool-and-nail to keep losses to bare minimum. With the current bid, the share of each team increases and profits can be reaped well by all the IPL teams. It just paid off for most teams who survived for 10 years in IPL (Deccan Chargers, Sahara Pune Warriors and Kochi Tuskers quit due to financial constraints).

 

Hard luck for Sony

 

I personally felt bad for Sony Pictures Network India. Ranked among the best companies to work in India, things seem to not go in favour of its new Sports vertical. Be it in 2009, when BCCI renegotiated the contract for IPL rights after differences with World Sports Group or the BCCI Indian matches rights in 2012.

 

In 2012, Star India bid for Rs.3851 crore against Sony’s Rs.3700 crore for telecast rights till 2018 for all matches BCCI hosts in India. A whiff of Rs.100 crore could have costed its new vertical started in 2012 with Sony Six, but it survived with IPL and started buying rights for properties like the FIFA, Australian Open, TNA, UFC and NBA. It had expected to secure the IPL TV broadcasting rights, but Rs.500 crore difference between the highest and consolidated bid resulted in losing out on IPL rights for the next five years.

 

The Sony Pictures Network was determined to win the IPL TV broadcasting rights and the Rs.11050 crore bid showed its determination for the same. A difference of Rs.4600 crore with its next competitor Star India, it was almost certain that Sony Pictures Network would win the rights. The major place where Sony failed to gain the rights was the digital vertical. Sony Liv was launched in 2012 (way before Hotstar) but Sony never tried to develop the vertical like its peers Viacom18 and Zee Entertainment. With YouTube feed for all its GEC shows, it never showed determination to develop SonyLiv. They launched LivSports in 2014, but were later merged with the main digital platform SonyLiv.

 

But the major surprise came when Sony Pictures Network bid only for Indian Broadcasting rights while Star India was the only player who placed the consolidated global bid. Despite the partnership with ESPN for one of its television channels, it couldn’t forge a deal for bidding on the digital rights.

Sony Pictures Network lost out only because of the digital rights. Sony’s bid shows that Rs.11050 crore is achievable within five years of TV advertising revenues and Star can be rest assured for better returns. Sony was just unlucky despite being the highest individual bidder in the segment. Star was barely the highest in the UK territory rights.

 

Sony has rights for matches played in Sri-Lanka, Pakistan, South Africa and New Zealand due to its acquisition of Ten Sports vertical for Rs.3851 crore. With 11 channels, Sony desperately needs the BCCI rights up for renewal in 2018 and rights of matches played in other countries up for due in the coming years. But this won’t come until Sony seriously thinks about its digital strategy to monetize returns and stay relevant in the market of virtual monopoly held by Star India.

 

IPL was an important property for Sony Pictures Network. It was these rights that pushed Sony SAB as one of the most successful low investment high returns GEC channel which is a 24-hour comedy channel and doesn’t invest in non-fiction high ticket properties. Most GECs have content for over 30 hours per week, but Sony SAB is reaping benefits with low hours of original content on air. Sony Entertainment Television (flagship) experiences a superb run in 2011 thanks to all-round marketing and big-ticket non-fiction properties backed by IPL.

 

While things aren’t bad as it seems as Kaun Banega Crorepati is doing good for the channel, a new range of shows are coming up in the month of October-November for the flagship, expected to put it in the top league of channels in the Urban markets. While SET’s shows have a very realistic approach (as contrary to saas-bahu sagas on Indian TV), some shows enjoy immense popularity on digital platform (Kuch Rang Pyar Ke Aise Bhi is returning for its second season thanks to its digital viewers), this is where Sony must work to make SonyLiv work before 2018 BCCI rights. SonyLiv must be able to promote its digital originals to make things better for its ad-supported platform. With 11 channels in its sports vertical, it needs to focus hard to keep things in its favour.

 

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