MUMBAI: To the winner go the spoils, but if the price is NOT right, it can also prove a poisoned chalice. The fact that the global media rights to world cricket’s biggest and most valuable property did NOT go for some ridiculous figure is proof positive not only that Uday Shanker’s strategy team at Star India were bang on with their calculations, but also a sign of a marketplace that has matured.
Still, the biggest surprise for SportzPower in the bidding for five-year Indian Premier League rights was that incumbent host broadcaster Sony Pictures Network, which built the IPL property for ten years since its inception in 2008, did NOT put in a consolidated global bid.
When contacted, Sony Pictures Network told Hindu Business Line: “SPN has nurtured IPL since its inception and, within a span of 10 years, established it as one of the most popular sporting properties in the world. We take this opportunity to wish Star India the best as they shape IPL over the next five years.”
What was NOT a surprise though is that despite all the media chatter in the lead-up, Discovery Communications’ branded DSport was NOT among the contenders.
Coming back to Star, the 21st Century Fox owned network’s consolidated bid of Rs163.475 billion for the India TV and digital (internet and mobile) rights as well as the rest of the world rights was higher than the Rs158.19 billion bid that came through as a sum of the different parts bid by the other contenders.
The BCCI had kept all options open in terms of inviting the bids — a consolidated bid, breakdown of bids and both, with revenue maximization the logic behind it.
For some perspective, it is worth noting that five-year TV rights for Cricket Australia’s Big Bash — the world’s next most valuable T20 league after the IPL — initially went for A$100 million. The current rights cycle expires at the end of next season. For the next five-year deal, CA is expecting the property to deliver A$250 million ($198.75 million, Rs16 billion).
Star India CEO Uday Shankar
About Star’s consolidated bid of Rs163.475 billion, the point of most interest to SportzPower was that the bid numbers that it put in for the various indiviual parts tallied up to less than half of the consolidated bid at Rs78.8348 billion. When SportzPower questioned Shankar on this discrepancy, the Star India chairman & CEO, while not giving a straight answer, indicated that Star’s principal strategy was built around getting the full complement of IPL rights within its fold. “We have lived without IPL for the last ten years, and we were prepared to live without it had we not won it all,” Shankar noted.
Shankar elaborated on that point in a separate interaction with PTI wherein he stated: “So we were prepared to either get everything or lose everything whereas others focussed on specific areas of interest. We wanted to get India as well as global rights so that we can unlock a better value for our business. Even if we have been marginally off in any of the segments we would have lost it.”
There is no gainsaying that Star was only marginally “on”. The difference between Star’s consolidated bid and the sum of the parts from its rivals was just 3 per cent.
Which, by extension, also means that 21st Century Fox CEO James Murdoch’s contention during an investor call early last month that any IPL bid would be made keeping in mind targets in India of $500 million profit – of EBITDA next year (and $1 billion by 2020) have been broadly adhered to.
Shankar, in a statement released after his network won the IPL rights, further added: “We are honoured to be selected as IPL’s global media rights partner and we thank BCCI for conducting such a transparent process. The VIVO Indian Premier League is undoubtedly one of the most exciting sporting leagues in the world and this acquisition of media rights reaffirms our commitment to serve cricket fans and make cricket even bigger than it is. We are delighted that in Star, IPL has found its natural home. We look forward to bringing this exciting format to our audiences across the world in a quality that all our viewers are accustomed to both on television as well as on digital on Hotstar.
“At Star India, we believe that Indian sports have barely scratched the surface of its potential. Both the viewership of sports and more importantly participation in sports is something that we would like to grow substantially over the next few years. The acquisition of these rights is symbolic of our commitment to not just cricket but to the growth of a wider sports culture in the country.”
Speaking of the competition, two numbers in the bid summary provided by the BCCI (which can be accessed stand out. The Rs110.5 billion that SPN bid for the India television rights and the Rs3.9 billion that Facebook bid for the India digital rights.
As these are the highest bids for the India television and digital rights pieces respectively, one can also deduce that while neither of the two bidders expected to turn a profit at the end of the five years they would hold the rights had they won it, they were convinced that there was enough business logic in terms of growth of the overall respective businesses to justify the bids. Put another way, these are the two outer limit bids that could justifiably have been made for the television and digital rights.
Pertinently, at Rs110.5 billion, SPN’s bid tallies quite closely to the number that SportzPower had analysed as being the outer limit bid for IPL’s India TV rights – Rs111.5 billion.
As for what plans Star has for the digital rights, Mint quotes Shankar as stating that Hotstar, the company’s OTT platform, which has consistently topped consumption rankings in India, will start its first phase of international expansion in the next couple of months.
“We will launch it in a few international markets in the next couple of months,” said Shankar.
Added together, the combined TV and digital rights bid value for India stands at Rs149.5 billion. Or put another way, there is still a Rs13.975 billion shortfall of the Rs163.475 billion, that needs to be recovered from the rest of world if Star is able to monetise the IPL in a best case scenario. Can it be done? We do not believe so.
In fact, SportzPower stays with its original prognosis that the (recoverable) total rights value of the IPL in a best case scenario should be south of Rs141.7 billion or $2.2 billion. Star’s bid of $2.55 billion will leave it short by $350 million at least. Which is a loss that can be absorbed over a five-year time frame, more so considering that the IPL remains the most scandal and recession proof media property this country has on offer.
POSTSCRIPT: On the bogey raised by the Zee Group that the regulator needs to look into Star’s current monopoly of Indian cricket, BCCI treasurer Anirudh Chaudhry put it perfectly to Indian Express when he stated, “It’s my personal view that this theory is not based on strong fundamentals. Today’s process was very transparent. It was a very competitive bidding process. Star won by only a difference of 3 per cent. Currently, they also hold the rights for the bilateral series. BCCI had even allowed consortiums and the opportunity for two or three parties coming together with a bid that might be above their weight category. Star had a great strategy of going for the whole hog. I cannot fathom a situation where one would be ready to give the rights to an organisation that may not give the highest value but because it’s an organisation that doesn’t hold one part of the rights. In six months when the rights for the bilaterals across all three formats and domestic cricket comes up, if there’s any company who feels that they should break what they’re terming as Star’s monopoly, they are free to compete aggressively.”
