MUMBAI: As the clock counts down to the opening on Monday, September 4, of bid documents and announcement of the holder/s for the next five years of media rights to world cricket’s most prized property – the Indian Premier League – a second look at the contenders, the pretenders and the numbers in play.
SportzPower had earlier done an analysis of the possible scenarios around the television broadcast rights which can be accessed. Now we offer a perspective on a consolidated bid and the sum of its parts.
The BCCI has kept all options open in terms of inviting the bids – a consolidated bid, breakdown of bids and both – the Indian cricket board’s logic being that keeping all options open allows it to look at revenue maximization.
While the BCCI’s argument is certainly valid, seeing as of the 22 entities (as per SportzPower’s understanding) eligible to bid, 13 of them will only be interested in the digital piece (eight of these 13 only for the India part), there is certainly a strong case for separating out the India TV rights, the India digital rights and the rest of the world (ROW) media rights.
That query has been answered clearly by BCCI CEO Rahul Johri, who told Economic Times: “The highest total will win. If the global bid is higher than sum of all, irrespective of whether for one or two regions his proportioned amount is lower than the highest bidder in that region. For example, if a player bids Rs110 as global bid, out of which he puts Rs100 on TV and Re1 each for all other rights, still if it is the highest bid, he’ll win.”
Since it is clear that sum of parts will decide, one thing that is also clear is that it will be the digital rights piece where most of the action will be seen and therefore offers the most uncertainty.
And here, it is in how the IPL digital rights have been exploited in the last three years that the likes of Amazon, Facebook or Twitter will be taking their cues from. In this short time frame, Star India’s online video streaming service Hotstar leveraged the IPL as its key driver to become India’s premier over-the-top (OTT) platform by a long mile.
Star India subsidiary Novi Digital Entertainment, which runs Hotstar, had picked up three-year IPL digital rights for Rs3.02 billion and in that period ratcheted up revenues from Rs300 million in Year 1, to Rs650 million the next year and Rs1.2 billion+ from IPL 2017.
According to televisionpost.com, Hotstar, having launched in January 2015, in its first full year of operations, garnered revenue of Rs1.857 billion in FY16, with advertising revenue mop-up of Rs1.386 billion and subscription revenue accounting for Rs242 million while licensing of content rights stood at Rs192 million. Other income was at Rs37 million.
Now coming to the IPL rights value, around which one can only speculate. We take as our start point of calculations the numbers put out recently by global valuation and corporate finance advisory Duff & Phelps.
Duff & Phelps has pegged the renewed IPL television rights value for a five-year period at around $1.8 billion (Rs115 billion) and the renewed internet and mobile broadcasting rights to be around $210 million (Rs13.4 billion).
On the other hand, the Kalanithi Maran-owned Sun TV, which lists IPL franchise Sunrisers Hyderabad within its portfolio of assets, in its annual report for the year 2016-17, stated: “Sun TV owns an IPL team and we are already factoring in a 30 per cent increase in its IPL revenues, assuming rights sale at Rs9,500 crore (Rs95 billion) in FY19,” said the company report while adding that there could be an upside of another 2 per cent to its FY19 consolidated earnings forecast, in case rights are sold for Rs12,500 crore (Rs125 billion).
SportzPower did its own calculations for the five-year IPL rights which are as follows:
Television ad sales calculated on a CAGR of 10 per cent at Rs88 billion.
Subscription revenues on a CAGR of 10 per cent at Rs23.5 billion.
Digital revenues on a CAGR of 25 per cent at Rs22.45 billion.
Rest of world (ROW) income calculated at Rs8 billion.
So the total rights value of the IPL should be Rs141.7 billion or $2.2 billion.
This number is at the lower end of what industry executives have told SportzPower the IPL rights will go for, which is anywhere from $2.2 billion to $3 billion. We tried to do a calculation on what logic could apply for a $3 billion bid and the math just doesn’t tally. Even if one applies an impossible CAGR of 100 per cent on digital revenues, the number that is derived is Rs66.4 billion. Which would bring the combined total up to just under Rs186 billion or $2.9 billion.
POSTSCRIPT: We touch upon new sports channel on the block DSport again. We remain consistent with the view articulated that Discovery Communications, which has a market cap of $8.9 billion, will not have the appetite to bid for a $2.2 billion+ property when it is a new entrant in the Indian sports broadcast arena which has two deeply entrenched players in Star Sports and Sony Pictures Sports Networks.
Unless it enters a consortium bid that is. In interactions SportzPower has had with industry executives, the name of multi billion dollar Chinese conglomerate Dalian Wanda Group’s subsidiary Wanda Sports has come up as an interested party in the IPL bidding. Not connected to the potential Discovery bid it needs stressing but just to make the point that whichever entity Wanda goes with (if it has really entered the frame) will have the financial muscle to bid big.
FACT CHECK
Entities that picked up the ITT document in the latest round:
Airtel
Yahoo
DAZN Perform Group (London headquartered live sports streaming service)
YuppTV (US based Emerald Media-backed OTT platform for South Asian content)
Discovery Asia Pacific
Entities that picked up the ITT document in the earlier round:
Star India Pvt Ltd
Sony Pictures Networks India Pvt Ltd
Amazon Seller Services Pvt Ltd
Reliance Jio Digital Services
Times Internet Ltd
ESPN Digital Media (India)
GroupM Media India
Followon Interactive Media (Chennai based fan engagement platform)
BTG Legal Service (Mumbai based law firm)
beIN Intellectual Property (Qatar government owned sportscaster)
Gulf DTH (Showtime Arabia TV Network)
SuperSport International (South African pay-TV operator; Supersport International Holdings operates as a subsidiary of Naspers)
Econet Media Group (South African telco)
Sky UK
BT Sport (UK telco)
Taj TV India (ineligible to bid after SPN buyout from Zee Group)
The BCCI had reopened the IPL bids on 21 July after the earlier process got cancelled with the Supreme Court-appointed Lodha Committe refusing to give the BCCI permission to go ahead with it.
IPL MEDIA RIGHTS – ELIGIBILITY FOR BIDDERS
Indian Subcontinent Television –
Permited areas of business: Indian Subcontinent Television – Television Broadcasters (Non News)
Indian Subcontinent Digital –
Permited areas of business: Broadcasters, Internet operators, mobile operators
ROW Media Rights –
Broadcasters, Internet operators, mobile operators and marketing agencies
IPL MEDIA RIGHTS – ITT – ROW TERRITORY GROUPINGS
ROW – TERRITORY GROUPING A: Whole of Asia barring Indian subcontinent, Australia, New Zealand, Canada, the Caribbean, Central and South America, Israel and the Pacific Islands.
ROW – TERRITORY GROUPING B: Middle East and North Africa
ROW – TERRITORY GROUPING C: South Africa and Sub Saharan Africa
ROW – TERRITORY GROUPING D: UK, Ireland, Europe
ROW – TERRITORY GROUPING E: USA
