THE DELHI High Court matter between Star India Pvt. Ltd. (“Star”) the plaintiff, and Cricbuzz, Idea Cellular and OnMobile Global Ltd., the three defendants, has set the sports media world abuzz with a March 13th, 2013 judgement that is likely to have far-reaching commercial ramifications in the sports sponsorship and sports broadcasting domains.
And, while there has since been a status quo stay order passed recently, the matter is likely to once again gain relevance prior to the next hearing on the merits of the case – the next hearing of the Delhi High Court is on the 29th of April.
Framed on the basic contractual tenet of unjust enrichment and balancing it with public policy, the current judgment intends to honour the right to exclusivity that Star & BCCI agreed to in the media rights agreement on the 10th of August 2012 (“Media Rights Agreement”).
From a commercial perspective, a judgment granting Star the right to own, monitor and enforce its right to a comprehensive ‘bouquet’ of rights across the broadcasting spectrum is a shot in the arm for broadcasters in the sports domain. Until now, broadcast rights holders were for the most part, the victims of ambiguity when it came to enforcement. With a judgement singularly in favour of the rights holder, the sports event organizer’s ability to circumscribe the bundle of rights is certainly enhanced. And, the right of the broadcaster to monetize, commercialize, and enforce the entire bouquet of broadcast rights will stimulate interest in broadcasters looking for properties that have positive pecuniary benefits and synergies in the broadcasting spectrum. It also opens revenue streams from relatively inexpensive verticals, while also providing the right to sub-license or grant the right to charge a sub-licensing fee from mobile service providers. This could in theory subsidize the cost of acquiring broadcasting rights for popular properties. Or, if a relatively diverse player in the multimedia domain chooses to create its own verticals in this space, the current judgment helps clarify the rights holders’ exclusivity and ability to monetize and commercially exploit rights that it has paid for.
From a broader perspective, if the concept of ‘bouquet of rights’ in all sports and sports media contracts becomes an industry standard and acceptable in common-law parlance, then the ability to monetize and commercialize all sponsorship and endorsement contracts without the fear of infringement or brand dilution would lead to an exponentially increased interest in the sports sponsorship and endorsement domain, especially from international brands and domestic brands that are traditionally conservative in below the line or above the line marketing activities. To further sweeten the pie, within the ‘bouquet of rights’ that will now be offered in a comprehensive rights & benefits package, there could be the opportunity to sub-license or outsource the activations of some of the rights to either increase the return on investment, or reduce costs/subsidize the sponsorship fee that has been paid by the main rights holder/sponsor.
The intent of the judgment clearly favours the larger players, because unless tenders for broadcast rights are stratified based on the broadcast products/offerings, only those who are big enough to maximize and monetize multi-platform avenues will be able to enter the ring. Whether the focus on larger players leads to a squeezing out of smaller players who no longer have a play in the face of a monopoly, oligopoly, or monopolistic competition is anyone’s guess. This could of course trigger regulatory challenges, the outcome of which will depend on the nature and extent of unfair practices (if any) by the licensor or the licensee.
The concept of an ‘a la carte’ menu of individual rights as opposed to the comprehensive bouquet of rights, it has been reasoned, is an indication of the intent by Star to leverage the multimedia and mobile rights. There is likely merit in this reasoning, since the option of merely choosing certain individual rights as opposed to the comprehensive bouquet of rights is meant to be an inclusive measure as opposed to exclusive. However, given that the per match cost of the a la carte right to mobile rights and/or mobile activation rights was approximately Rs5m per match – it essentially means that the barrier to entry for smaller players remained, while for larger players, the value from purchasing the bouquet of rights would likely yield more benefit as opposed to individual rights.
Ceteris paribus, there are some grey areas in the judgement, which could be open to interpretation. One to keep an eye on is what may be a loophole for providers to use the ‘gratuitous’ exception, and provide the service free of charge. Although the Media Rights Agreement may clearly specify attempts to combat ambush marketing and competitors, one wonders if sponsored updates provided ‘gratuitously’ to the target end-user could in turn become revenue channels for smaller mobile services providers. Enforcement and vigilance will be key factors here.
It’s important to note that even today, if one looks at the broadcasting rights valuation for the Indian teams’ international matches, there’s no doubt that some quarters might feel that the broadcaster overpays. And if the end-game is to put a stop to leakage, free-riding, ambiguity or unjust enrichment, one must also look at the situation objectively – broadcasters will need to reap plenty wherever they sow to justify the investment in broadcasting rights.
Let’s see how all of this unfolds.
Essentially, this judgement and the upcoming hearings/litigation will likely have broad-reaching legal ramifications, and a few things are more than likely: (i) the term ‘bouquet of rights’ and the extent of such rights will be parsed and negotiated heavily going forward; (ii) either the federations/event organizers will find a way to stratify the rights offerings in a manner that successfully differentiates and monetizes each rights package, or else broadcasters/sponsors will become the conduits for ensuring that each vertical rights stream is monetized via third parties; and (iii) the broadcasters/sponsors will merely bid for the entire rights package and set about a strategic plan for recovering the amount spent- internally or through third parties.
Come April 29th, 2013, and we’ll see which way the wind is blowing.
