It was last September that Star India secured the five-year global media rights to the Indian Premier League with a winning bid of Rs 163.475 billion ($2.55 billion). Just over three months later, in December came the big bang announcement that the Walt Disney Co. had sealed a $52.4-billion all-stock deal to acquire 20th Century Fox and other entertainment and sports assets from Rupert Murdoch's empire.
As to the valuation of Fox's Indian arm in the calculation, a credible number that SportzPower has been given is $18 billion or 35 per cent of the whole. As for what Star's sports business accounts for in that calculation, 30 per cent would be within the ball park, an industry observer opines.
All of which provided the context for an extensive and wide ranging interaction on Star’s sports business SportzPower had recently with Star India managing director Sanjay Gupta.
Edited excerpts from the interview:
What sort of difference are you planning in terms of marketing activations for this IPL? Anything unique or just fan engagement plus usual wrap-around on available media?
I think there are two things we are trying to do in marketing and again, this is more concept than exactly the communication advertising that we do. One is, we are trying to start building a conversation with core fans early. Earlier it was four to six weeks before the IPL started, this year it started on 4th January, but what we showed – “selection se election” - is around trying to build a conversation with the fans. A two-way conversation.
So one big change we are making – it should be an engagement and a conversation. Rather than a one-way communication.
The second thing we want to do in marketing terms. There are two things which happen on IPL. One is a carnival outside the room and the cricket inside the room. Most of the energies have been focused on carnival outside the room. We want to continue that, but we want to put a spotlight on cricket inside the room in a very meaningful way. Therefore we want to raise the stature of the quality of the game dramatically without losing the fun and excitement of what IPL delivers.
IPL is the most competitive cricket tournament that happens in this country. Just to be provocative, it is actually bigger than the ICC World Cup. Because in World Cup, India takes on Afghanistan, Sri Lanka. Here you are fighting the best of the world. When Virat Kohli steps out (as captain of Royal Challengers Bangalore) to meet Mumbai Indians, he's facing the best of the world.
IPL is a great carnival. There is fun, tamasha, parties happening, fan parks. But if you put a lens on what is happening on the field, it is dramatically big. You would see that even in the content that we do.
I think that is where the marketing would work. One is building a genuine conversation with the fans, and second is cricket inside the room should really get a spotlight.
IPL for a long time has been branded as a frivolous activity. People talk very loosely about it - accha hai, par isse kya fayda hai? IPL has thrown up some of the best youngsters this country has seen play for India today. Be it Hardik (Pandya), Kuldeep (Yadav) – these are all discoveries of IPL. It is important for viewers and community and media to see the good power of IPL as much as the carnival.
One could argue that the said frivolity is linked to the schizophrenic nature of the game. The purists still sing paeans to Test cricket, but it is T20 that connects to today’s fans. Fact is that there are no spectators for Tests now.
Yes, and I think without presence in stadiums, there is no game. You don’t have the excitement of fans in the stadium. Fans are voting with their feet all the time. That is true for businesses all over the world.
Talking of media rights, with IPL in your kitty, the word on the street is that outside of maybe BCCI rights, Star will not be an aggressive bidder for international cricket rights. We have already seen that the Australia media rights went to Sony for half of what you were paying. What this means is that Indian broadcasters will no more be the honey pot for other cricket boards. Ergo that would necessitate individual boards to focus more on their own T20 properties. And with cricket's Olympics entry also being T20 focused, Test cricket seems to be living on borrowed time. Your view?
That’s a problem that ICC and BCCI need to solve. What they want to push and what they do not want to push.
Our portfolio of cricket today is pretty diverse. And we look at it from two standpoints. The IPL is a very big marquee property and is shaped up to grow. We are also keen to run a portfolio where our forex exposure is limited. IPL provides that cover. For ICC, we need to pay in dollars, but when you pay in Indian rupees, that’s a better portfolio to build.
The rupee has gone from 35-40 against the dollar to 60-65 and you don’t know where it will go. To 80-90? How do you know. So we have been careful in rearranging our assets, to be in tune with where we believe is a prudent business that we run.
Second thing is we cannot bankroll anyone. It has to make business sense for us. For BCCI or any other sporting rights that come in, after having a very good portfolio of cricket, kabaddi, football, we will invest only if it makes business sense for us. It will not be any irrational bidding or commitment from us if it doesn’t make business sense. That’s how we feel comfortable about having a good portfolio of rights of sports, between cricket and other sports now. We will be open to something new coming up as a new league, yes. But those commitments are always lesser in terms of value that you need to commit to, versus the rest of the portfolio.
Yes, the monetisation of Tests are far lower than T20. So commercially, and even if you look at the Sony deal with Cricket Australia, the Test matches come at a much cheaper price compared to T20 and ODIs. Each of the boards will need to keep evaluating this.
Coming back to your stated goal to present the IPL as a six-month long fiesta, what is the post-tournament strategy?
Post IPL will be about looking back, at least the month after that. It was so visible in the retention event also, the strategy of different teams is so different and so unique. Not enough analysis is done, enough conversation is done, enough looking back is done. If you look at Premier League, the amount of analysis which gets done while the tournament is building up to once the matches are on, and then when they are over, is a tribute to the quality of people who run it and they have thought about how to make these heroes bigger than they are.
The Premier League has the advantage of running for eight months. So there is much more content to play with pre and post.
There is still a look back possible for a month. After that, there is TNPL (Tamil Nadu Premier League) and Karnataka Premier League for us. We have both those. Some interesting conversations will carry on from here to those leagues. We will do that in June. Who are the big finds, the big players, where will they play next, focus on players from Tamil Nadu and Karnataka. There are interesting pieces of content within T20 which we can use to string together for the next few tournaments, which will happen.
Moving on from IPL to the bigger picture, a little over four years ago, in November 2013, Star announced it would be investing upwards of Rs 200 billion not just to expand its sports coverage in India, but also that the monies committed would be a key driver in its vision to be a catalyst in building a multi-sport culture in India. Performance-wise, India's medal tally at Rio 2016 showed how long a way we still have to travel. What's your assessment now as we go into 2018? And tagged with that is the point that Star as a private entity has taken on a social burden that is not really within its ambit to take.
I don’t think we are taking the burden or pain of changing this country into becoming a sporting nation. We can be the catalyst, but we cannot be the driver. The driver is the larger society and larger ecosystem. More than owner and driver, we are the catalysts. I think the power of media, and television in particular, given its reach, and given the aspiration it can create for a sport or a sporting activity is quite dramatic. When I look back on the last five years, it is what we have done in driving multi sports leagues, which we have done almost continuously. We started with the Hockey India League.... to cricket, to kabaddi, to tennis, TT, badminton; almost every big sport you can name, we got into it.
I think we have triggered two levels of conversations, desires and investments – one from a viewer/ consumer point of view, that I am interested in watching a lot more than cricket. So whether it is kabaddi or football, depending on which geography you go to, there are a large number of people following it.
When we got into kabaddi, people said it’s a rural sport. Who will watch it in urban India? The reality is that if it’s a great sport, people will come and watch.
So one big movement has been that multi sports, or sports beyond cricket, have got a certain level of recognition from a viewer point of view.
The second trigger is the set of investments that are happening in this sector which I have never seen before.
For example, the number of ideas I get at Star today on new leagues that people want to start, from kho kho to panja, to any other sport, is dramatic. Not all the leagues have come on Star, but at a local level the wrestling league has started on Sony. Volleyball league is in the pipeline. There is a pool table league started somewhere else. I see one change – lot more people thinking about where to invest in sports, and it can be a big opportunity.
We have been able to become in a small way a catalyst, from personal ambition of people, starting a business for someone else, or starting a new career opportunity. If this is to get amplified over the next five years, this is a two- to three-decades change – from being almost a no sports country to becoming a sporting country.
Having said that, we are not here for charity.
Today, from the business we run, we are in a space where we can build a meaningful profitable sports business in the next five years. To me, that’s a big change as far as business contours are concerned.
Have we lost money in the last five years? Yes. But are we confident as this year unfolds that we are building a profitable business? The answer is yes again. That’s the shift in the business scenario that is happening. That is because brands are interested in putting in more money, they believe that sports is a great tool to engaging with viewers.
Subscription is becoming better in this country than what it was five years back. There is more transparency. That’s happening independent of what we are doing. The distribution industry has changed dramatically – more transparency; you know the consumer base by name and number because there is an identifiable set-top box. There is a traceable component.
Some of these things are helping the monetisation agenda for sports. These are important parameters to build a strong business. So both the change in the distribution ecosystem and a mindset change is what is helping to build a meaningful business for the future.
What of hockey and the Rs 1.5 billion commitment to the sticks sport you had announced in 2014. Last year Star reworked its deal with FIH. Isn’t that a tacit admission that while notionally hockey is our national sport, it remains a hard sell?
Yes, it is a hard sell. As we have gone through sports, we have realised that for sports to become mass, the cost of entry into a sport has to be low for a young kid. Kabaddi, football, or cricket are far easier to start playing even at an amateur level. In football you need one football and 20 kids can play. In kabaddi you just need space to play. In hockey, both the turf where the real game happens, and the fact that you need a hockey stick for each kid makes it an expensive sport for a young Indian to get into. If you need to build a sport like hockey, the capital investment required is dramatically high; our schools don’t have those facilities.
For hockey to grow dramatically, we need to invest, and hockey can only be played on real turf (astro turf). Now, that’s where the real competition is. Grass hockey doesn’t prepare you for turf, because it’s a very different game.
So should we give up on hockey?
We started very big on hockey, but we said let’s not try to start by dramatically investing in hockey. As you rightly said, within the FIH, we have only focused on India now rather than take the whole global rights.
In a portfolio, not everything will require big investment. We will continue to invest in hockey, but we are careful not to over invest.
Which is what we are doing in kabaddi and football also. These sports also have a legacy and a history. There’s a long history of what sport people have played that comes naturally to them. So Bengal plays football, Kerala plays football, but in a UP or a Bihar or Punjab, kabaddi is a much greater sport.
Not every sport requires the same investment in the same level across all geographies. Let’s pick and choose and run a good business model around it is the way we look at it.
It’s not about giving up on a sport. It’s about calibrating how much and where to invest, realising fully that there are different challenges for each sport. And different opportunities to invest. So we are running a portfolio and will continue to do so because I believe we need to build multiple sports.
We cannot have a single sport. But where to build is something we have to calibrate as we keep learning every year.
Last year you said 2017 will be the first big year for sport beyond cricket. We have seen that with football and kabaddi. Any other sports you are evaluating?
Currently we are not evaluating any other sport, but there will be more sports that will grow in this country.
As I said, I think if it has to be a mass sport, the cost of access for any kid in this country to the sport has to be low for it to be really mass. If we invest in a sport where cost is high, we need to calibrate our investment that talks to a smaller part of the country and be careful. We can’t take golf and expect it to go mass. It’s easy to be caught up into the idea of a sport. But till the sport can be played by many more people... kabaddi, football, cricket are all mass sports. But others we need to be careful in how much do we invest.
If there’s an idea that comes along where the cost of entry is low, and could be a mass sport, we will go big on it.
What’s your take on volleyball?
I think it’s a very interesting sport. Personally, I think it’s an exciting sport. That’s one sport, in my travels, I haven’t been to a city or town where I have not seen anyone not playing it. Some of those sports are also limited by the administration around them.
In the same interview you said that in the sports business, investment phase is over. This financial year, you would see break even as far as sport is concerned. Does that assessment still hold?
And the $500 million EBIDTA target that Star has for this fiscal. Is that also achievable?
I will not comment on that. It’s market sensitive information and with the (buyout of significant parts of 21st Century Fox) deal with Disney would like to stay away from any comments on the overall Star India financial or commercial status.
Ok let’s focus on your sports business. On the matter of non cricket sports, you launched Star Sports First on DD's DTH platform Freedish, which has an estimated 22 million subscribers, and is the primary distribution platform for Pro Kabaddi League. How do you respond to critics who argue that while Star Sports First would have bulked up ad revenues, the potential negative impact on the overall sports subscription revenue market does not justify the move?
That is not why we launched Star Sports. First, there are roughly around 30 million households with a Freedish connection today, accounting for roughly around 150 million people, largely in the Hindi heartland, who before this had only DD Sports. One of the realities if you are truly to be the catalyst of change, is to expose people to sports. And get them to start shaking hands with the idea of sports. Star Sports First is an attempt to get them to do the first handshake, and get them to experience sports beyond cricket. Because cricket is still seen because of the must provide clause. A lot of cricket games come on Doordarshan and they end up watching – at least some. The reason we put Pro Kabaddi there was to get them to notice and say: ‘wow... sports can be so exciting’.
The question remains about added ad revenues.
Very minor. It was not for the reasons of ad revenue. The strategy was if you need to introduce something to people, how do you make it exciting for them to say there is something interesting. It was an interesting sampling device for sports. We haven’t put ISL on it. But will we put say a second tier league on Star Sports First? The answer is yes.
The attempt is to get them to handshake and not hurt the pay revenue. After kabaddi, we have not put anything else so there is no live cricket, kabaddi or football where we are building big leagues.
So is it misplaced criticism?
It is a lack of information, when you look from outside and don't know enough, you say it’s a bad move. Building subscription business of sports is a very important driver for our business and strategy. We need to secure that to build our business. That gives us the power to invest. If we don’t run a profitable business, there is no other catalyst to reshape it. We are very focused on building a profitable business.
You now have regional language channels in Hindi, Tamil and Kannada. Are there any more launches in the near term? If so what is the rollout plan?
Standalone Kannada and Bengali Star Sports channels are awaiting license from the I&B ministry, which is in process. If we get a license, we will put it on Star Sports Kannada. But if we don’t get the license, we will have to put it on another channel as IPL content. But we are very committed to building language and localisation on sport, with a unique channel for each.
We will do IPL this year in six languages on different channels, ideally on Star Sports channels for each one of them. It’s an important step to get those licenses.
Pro Kabaddi League is the jewel in the crown of Star's Sports non cricket play, and the fact that Star is a 74 per cent stakeholder in PKL means it will determine how this property will evolve. Could you throw some light on investment plans going forward, how you see it growing and its break even horizon?
We have grown in number of franchises from eight to 12 this year, and moved from a one month to a three month schedule. From 60 to 130 matches this year.
For each of the sports, the amount of content can be dramatically more than what we do today. For most of the leagues, for the next five to ten years, will move from a month or two months, if it is practically doable. IPL is limited by various other issues, but we have done that for football and kabaddi. Football has become a five to six month activity, kabaddi runs for three months.
So we are looking to grow the volume of matches being played by driving the number of franchises and matches they play over the next few years. We don’t have a different plan for next year, the thinking is that you keep scaling up these sports.
Especially kabaddi and football, as these are mass sports. These are two mass sports that we will continue to build. Have they broken even? The answer is no. Will they break even in the next five years?
Kabaddi would be much faster because that has scaled up much bigger must faster. Also kabaddi is big in states like Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra, parts of UP and Punjab, which are really the richest states of the country. Advertisers are really interested in putting money there. It’s a very good fit for an advertiser and they see value in putting money on kabaddi.
Football is very big in many coastal states of the country, where advertising spends are far lower. To that extent, there is limited ROI on what they invest there. Therefore, kabaddi has better potential to grow revenues than football in the near term.
How do you respond to the contention that after increasing the season length, both leagues failed to deliver on ratings this year?
Kabaddi delivered very dramatically on value this year. Football continues to be very big in the geographies it is big in. But it hasn’t shown the potential to grow in geographies where it is not big, and that’s one challenge.
We need to be patient when we invest in these leagues, which are changing consumers' beliefs and attitudes. They don’t change suddenly. A consumer who sees one match of kabaddi or football won’t become a diehard convert. It takes time to get on, start liking it, becoming a fan and then start spending money to buy merchandise, go to a stadium – so it is important to be patient around the new investments we are making.
If you are trying to earn profits too soon, that is not likely to happen. Therefore prudent financial planning is critical to run a business like sports.
Coming to ISL, as a 1/3rd owner of FSDL, you cannot control its destiny but what are Star's near to mid term expectations from the JV?
Well, in IPL we have no stake. Yes, the influence we have in different sports is different. In cricket, football, and kabaddi, the partners we have are very focused in growing the sport. Making it bigger and larger. And committed to the idea of investment to grow. I can say that for both football and kabaddi, Reliance and Mahindras are really good partners. The same I find with BCCI. They are willing to invest to keep growing the sport.
Every business entity exists to earn a lot more. So all three are fine, and to me the three big bets we are making we see a meeting of minds in the way we get to work. I don’t see a conceptual challenge.
Of course, if you control it fully, it’s even easier.
But the other thing is – Mashal (Pro Kabaddi promoter company), that we run also, we have separated from Star Sports fully. It is not a part of Star Sports team. It is a separate entity in the company. Just to ensure that it has to be run at an arm’s length from the Star Sports broadcasting entity. In some ways, their objectives are a little different. One is to maximise viewership and one is to maximise the value of our sport. Therefore they should be at arm’s length to each other. That is one thing we are focusing to ensure that in all these entities that we work with, we build a healthy ecosystem and even if we have a majority control, to separate it from our broadcasting business.
In both the case of ISL and PKL, the challenge you face as an owner is that media rights sales, which is the biggest potential revenue generator for any successful sports property, is written out of the equation.
The question really is, as the primary broadcaster, will we be open to that idea or not? That’s the first stumbling block. Will Sony be willing to do that or not? The only question is, why not? There is no reason from a commercial point of view. And I can give you only a foreign example. The content which is produced by studios... produced by Fox Studio and put on Disney and ABC, we can use the same model. We create movies in Fox Star which get sold to Amazon or even Viacom. And Viacom has made movies and sold to us. If there is real commercial value, people will buy into the idea.
Hotstar has become a case study globally on how to successfully build an OTT platform and forms a key piece in Star India's growth story. The sports play in that piece would have a major role, particularly as the IPL digital rights stays in house for another five years. Apart from ad sales revenue targets, which at Rs 2.5 to 3 billion is a really tough sell, what are the subscriber numbers you are expecting IPL to deliver this year?
The biggest driver for Hotstar was the ICC World Cup in 2015. The number of downloads we got during that singular tournament was one of the most dramatic growths.
Sports definitely has played a very important role in Hotstar’s growth. First with the World Cup, and then IPL. Cricket has played a very important role in a lot of people becoming aware, talking about it, and telling their friends.
As for your original question, it is difficult to say how many subscribers will come in.
I am not talking IPL alone. An important part of acquisition for Hotstar, the drama content comes the next day. The movies content comes a few days later. Because fundamentally this country is a country of low incomes and we will take time to warm up to an idea. Hence we want to get a large funnel of consumers to keep consuming content on Hotstar. Free will remain a very important part of it. As we move forward, over the next five years, we want to push the subscription agenda on Hotstar significantly. I don’t think it’s a one-year phenomenon. Because we are dealing with very deep-rooted beliefs around ‘why should I pay any money’?
Mobile has not crossed that barrier of why should I pay any money. There are two kinds of challenges – one is ‘why should I pay?’ and second is ease of payment. If you ask someone to pay, you need a credit card, the patience to go through is not very high because the convenience of doing it is very difficult. Some of the things like Paytm and Freecharge are simpler. So the newer technology or fintech will help drive ease of conversion. The mindset to pay has to come in. That’s a journey we are on. We will start using IPL to start moving people to subscription. But it’s not a switch on and switch off idea. It’s at least a five-year agenda. We are going in with our eyes open. Primarily, in the first year or two, the value will come through advertising money. From the third year onwards we should be able to start generating reasonable subscription revenues, to keep switching the business model on Hotstar.
And lastly, in a digital world the consumer has the ability to access a variety of content in multiple languages and on multiple platforms. Some concluding comments on how Star is using this opportunity to go deeper and serve the interest of all pockets of interests whether by sport, region or language.
We didn’t get into digital in 2015. We got into it in 2009. We started buying rights in 2009 though we were not using it. Our digital foray, which worked in 2015, was Hotstar. We have been committed to digital for a much longer time frame. The reason for that is simple. The content consumption of this country is TV. Till around five years back, it was two and a half hours a day on an average. Globally this goes to between five to six hours a day.
Globally too, when only TV was there, the global growth from 2.5 to 3 hours to five to six hours happened on the back of multiple TVs. The same family could watch three different pieces of content at the same time. That drove the change. In the US, when it went from 5 per cent to 90 per cent of second TV homes, is when the content consumption grew.
My belief is that in India, we are a poor income country with small houses. Single TV will remain. The mobile is the second and third TV of the house. When we are investing in digital, we are investing in growth of consumption dramatically in this country of second and third screens. And this is the preferred destination for youngsters in any case. Now what it will help us do, and this device will go even deeper than TV. Because smart phones become cheaper and they will go on to even deep rural areas where the cable or DTH connections may not be there. This will go deeper, faster than TV.
So we see ourselves as a company that is not a broadcaster, but as a storytelling company. And screens don’t matter. Screens are incidental.
We should have high quality stories across dramas, movies and sports which will deliver to young and old both. And be the primary driver of stories to them. The more they move towards digital, the more valuable that consumer and more value that Star India will have.
Our investment therefore has been a nine-year investment cycle and we believe this is something which will grow exponentially over the next five or six years. Both in consumption and value, from a business point of view.