In a wide ranging and extensive interaction with SportzPower conducted just ahead of the March 20 announcement of The Walt Disney Company closing its $71.3 billion acquisition of 21st Century Fox, SANJAY GUPTA, managing director of Star India, offers a detailed overview of the critical role sports plays in the business of India’s largest broadcast network.
Edited excerpts from the interview:
When we last had an interaction like this, it was in February 2018, close on the heels of the big bang announcement that Disney had sealed the deal to acquire most of 20th Century Fox. This meeting (March 14) is just days ahead of Disney wrapping up its $71.3-billion acquisition of much of Fox. Which, from a sports perspective, of course brings up the future status of ESPN in India into the conversation. ESPN currently has only a branding association with Sony in India, much the same as what Discovery has going with DSport. Will that change any time soon?
This is an interesting question that you have asked. What will happen to the ESPN brand in India? That requires Star and Disney talking together. And by law you are not allowed to do any forward looking conversation till the time the merger is approved and announced. Otherwise you are sharing strategies of the companies, before the mergers have happened. All these questions will come up on the table once the merger has been announced, and we bring the teams together.
Referencing our last interaction again, it was just ahead of your first season as network custodian of the IPL. You had said then that your twin goals were to build a genuine conversation with the fans, and second that cricket inside the room should really get a spotlight. ‘Star Sports Select: The Dugout’ was ‘cricket inside the room’ and it worked brilliantly. Were you satisfied with the outcomes of Star’s fan connect/interactivity activations from IPL 2018? And how is that being deepened, widened this season?
The way we did Star Sports Select Dugout and Hotstar Watch N’ Play was an attempt at giving fans an experience which is different from just listening to commentary. If Dugout is considered, the last season saw a lot of demonstrations and conversations taking place about the nuances of the game which made cricket alive inside the room. Both Dugout and Watch N’Play achieved this in their own way.
When we looked at the IPL, we found that it was initially restricted to just two languages – Hindi and English. What we saw when we went deeper, interacted with fans and looked at data consumption facts, is that their connect is much deeper to the game due to them having a strong affinity for the language spoken in their region. For example, 91% of people watch only Tamil content in Tamil Nadu. As a result, to our surprise, affinity towards the IPL was low in such kind of markets, prior to us winning the media rights for the competition.
Tamil, Kannada, Telugu and Bangla were introduced last year and a majority of our growth came from these last time.
One way you will be widening coverage of course is commentary in eight languages. I am given to understand that the back-end infrastructure built in at Urmi allows you to go up to even a 12-language feed. At this juncture, it would appear that an eight language proposition is just about right for this market? Your comment.
Yes, as a matter of fact, we have recently launched a dedicated channel for the Bangla language. We will also be launching ‘Super Sunday’ in our programming plans for the IPL 2019 in Marathi and Malayalam keeping in mind that two games will be held on that day and we wish to capture the holiday mood of normal cricket fans.
A separate feed for Star Gold will also be introduced which will focus more on kids and family viewing. The feel will be lighter and the game will be seen from a 12-year-old’s lens for example.
We have created more capacity for languages no doubt because it is not just about live action and it is easy to put up only a commentary box. However, our focus is largely also on the programming and non-live aspect of the event such as pre-shows, match wrap-ups and other feature segments. This is why investments are growing in infrastructure which will happen right up till the World Cup as well.
More languages will be taken seriously in the future too, so a separate Marathi channel on the lines of Bangla or Tamil cannot be ruled out.
Additionally, the future will see us adapt a multi-sport, multi-language strategy because the timing of leagues such as the ISL, PKL and Indian cricket matches will clash at some point. Our aim of going big with introducing Marathi and Malayalam this year will depend on how people receive it. Though we are going against traditional wisdom due to the perceived favouritism to Hindi in Maharashtra, which isn’t true entirely.
Punjabi or Gujarati are also interesting languages to explore. Do we need to segment HSN in different languages is the question we need to ask ourselves and a decision on it will be taken after the World Cup.
Kabaddi is massive in Maharashtra, so we are all the more convinced about Marathi. The idea is that if two sports in a state have a massive following, we must focus on the regional and language aspect to reach out to them.
The real innovation / interactivity play will perforce be on Hotstar. I understand what is being offered to advertisers is that they can target 24 different cohorts during the live streaming. Additionally, brands have been provided with an opportunity to engage directly with viewers through contextual branded cards showcasing offers, mini-games, and polls. Secondly, for consumers, it is the new social cricket watching experience ‘Koi Yaar Nahi Far’, which will allow users, irrespective of their location, to invite their friends and family to watch matches online and participate in the Watch N’Play games together.
Have I missed anything?
We are taking two seriously big leaps with Hotstar this year.
In this IPL, technology will be used to bring people together at least if not physically, but content wise. People can be enabled to share conversations with each other, which will result in more conversations being curated online. I see more photographs and videos shared as well, it will apply not just in sports but drama as well in the future.
Content experience will become more social this year. We tried Watch N’Play, which just applies to the live feed and is more on prediction. It is a very big experiment we are going to try since no global player has tried it on the scale and platform of this kind, i.e the IPL. This is the first big phase of experimentation.
Secondly, what we are also trying through our partnership with Swiggy is that through visual view, people’s viewing experience of a live cricket match is uninterrupted yet our advertising is personalized for the fan.
It is important to keep fans engaged during the live game. As a result, on the same screen there can be a seamless, one-click transaction such as ordering a typical Aloo Paratha or Biryani from Swiggy through a notification.
We are taking the next leap in engagement technology. Technology experimentation is robust and will be big, we tried it out in a small way during the India-Australia series.
Its success in the IPL can also encourage us to take this idea in other sports and forms of content. These will be game changing experiments.
I am assuming that this would pretty much be what is on offer to advertisers / consumers for the ICC World Cup as well. Correct?
The strategy will pretty much be extended to the World Cup, by the time the IPL gets done, we would have perfected it.
We are looking at feedback from our Marathi strategy in the IPL to make it bigger for the World Cup. Licenses are in place to launch a full-fledged channel by then as well.
As an advertiser, my experience in telecom tells me how crucial it is to interact in Marathi in Maharashtra because it was a struggle. No other medium delivers as well. It is a great test market for any brands, having the potential which not many have recognized. There is a compelling advertising logic for players in the state, due to good per capita income, different languages, greater market penetration, you can try different things.
With 2019 being an election year, the media rights servicing outlay for IPL (Rs 32 bn), BCCI cricket (Rs 12 bn) and ICC (Rs 3 bn) together will total Rs 45-47 bn or thereabouts as per my understanding. There is also the marketing costs that overlay this. The follow up to that is that even in a normal year, the challenges to mopping up ad revenues from your OTT/channel business is huge. So the challenge of achieving P&L targets would be under enormous stress all the more this year. Is Team Star up for the challenge?
We do a 1-year and a long-range planning. Sport holds no surprises, so our plans are pretty sure of being worked out. I don’t see a big difference elections will make from a business point of view, though there is a lot of buzz.
We have looked at this carefully. There’s a misconception that news channels go through the roof in the elections, which is only for 2 days.
The good thing in business this year is that it has already been a better year from an advertising perspective. There are different categories of businesses which are getting bigger. Education, phone payments, services, medicine can be taken for example.
Secondly, FMCG players have benefitted tremendously from the GST policy due to policies becoming more streamlined and plans becoming clearer. There has been a good uplift in volume growth which is great for advertising. This is good news for all our businesses because the demand is high.
We have learnt a ton from last year. What advertisers value, how Hotstar and TV offers in value together, consumer preparation, language, content plans has been an exponential learning curve.
Our sales team got a feedback from advertisers that IPL worked. For us, it has been a rewarding journey so far.
Let’s talk about the potential that the TRAI directive on channel offerings brings to the table for your sports subscription business. Which is where the play is in mature markets but still not so in India. The way we see it, this has exponentially increased the importance of live sports and Star is best positioned as a network to leverage that. Could you offer a short, mid-term and long view outlook on how you see the new subscription paradigm unfolding?
We have believed in the power of sports in the last five years, which reflects in our investments. One of the challenges in sport is that operators have charged high prices for consumers to access it, as a result the numbers on sport viewership was dropping.
The TRAI directive has made us think differently and as a result, we have come out with our Rs 49 pack which involves all sports and entertainment content which is the best Star can offer vis a vis someone paying Rs 200 to just watch sports. This has made us become more accessible. The aim is not to try earning more money; more people should watch it is important.
Making more money by switching channels throughout the season and sometimes neglecting sport has hurt the culture of sport in the country. Hence, democratization of sport is the ultimate aim across languages and this is the best way of promoting sport in the country. Earning more from the masses than earning from a few people at a higher price makes more business sense too.
Investing in making content better and better and increasing its availability is our focus while creating our pricing strategy as well. Although there are middlemen still as a challenge, that issue will reduce this IPL.
The power of sport lies in its urgency for viewership. We want to see sport live and now, not later. Urgency is the highest in the IPL, which works in our favour. Although things have been chaotic in the first two months (of the move to the new TRAI regime) due to many stakeholders impacted due to decisions, the IPL will help settle things down.
Moving down from cricket to international football. I understand that Star has renewed EPL rights for another three years and all that remains is the official announcement. In August 2018, SportzPower had predicted that the EPL rights value would drop from the $90 million payout in the last cycle to a $72-$75 million range as a best case scenario. Were we right on the money then to argue that we would be more surprised if the price was significantly higher than this number than lower?
The deal hasn’t been finalized as yet but we are very excited about the EPL. We’ve had it for a long time and want to continue to have it.
Which brings up the natural corollary, and the point you made when we last interacted. Which is that when you pay in Indian rupees, that’s a better portfolio to build than when you need to pay in dollars. Which pretty much means that ALL international sports properties, whether on Star or rival Sony, will likely see renewals either with zero upside or a contraction in dollar terms. That is the way SportzPower sees it. Would you agree?
The big move we made was in IPL and the BCCI, which are both rupee denominated. So, the only foreign denominated assets for us now are ICC and some of these international rights. As a percentage of the portfolio, they are much smaller today. We are as a result, much more in control of the business since we aren’t affected by the exchange rate which impacts the US dollar the most. To that extent, we are far more secure today, with the portfolio of rights that we have.
Now (on international rights), it’s a question of what’s the right portfolio to have, and what’s the right price.
Staying with football, let’s look at ISL. There was much talk at the beginning of the season that the media rights value that would be accounted into the central revenue pool by FSDL would be significantly higher this season. The season is over, but none of the ISL team owners SportzPower has spoken to are clear on that aspect. What is the real picture?
While there is a lot of debate on media rights value, I think the really big opportunity is to grow the scale of consumer affinity to both ISL and Pro Kabaddi League.
Football is much more local to a few key markets, while kabaddi is more widespread geographically. So it has a larger appeal compared to football.
Both these leagues have been operating for five years now. And have seen a certain amount of trajectory.
But both these leagues require the next big leap. New consumer segments, affinities must be identified.
I think what we all are trying to problem solve on both kabaddi and football, is how to grow it to the next level. That is the real problem to grapple with for everyone, including franchisees and us. If we don’t crack it, all the other questions are irrelevant.
And while on the subject of the Indian market reality vis-a-vis sports, last July, at CII’s Scorecard, you’d noted that the sports industry has grown from $1.3 bn to $2.7 bn in just a matter of five years. And given that sports is still at 0.1% share of GDP, India has the momentum to become a $10 bn industry in the next 5 to 7 years. Does that position still hold?
We are in a unique position where the number of screens in India is growing dramatically. We were at 200 million screens 3 years back. Today the number has reached 500 million, with 300 million smart phones. I think 5 years down the line, that number will reach 1 billion at least, TV and mobile put together.
Therefore what this is pushing for is dramatic growth of consumption of stories and content in this country. And that is unprecedented anywhere else in the world. If you have great content, you will find a viewer.
If advertising and subscription revenues keep growing. If per capita income keeps growing. If fundamentally we retain this trajectory of 6 to 7-and-a-half or 8% growth, over the next 5 years. Which means the real GDP growth is 6-7%, the nominal could be 10-12%. Advertising revenue will grow 2-3% higher than that.
So, we see a good growth because consumer incomes are increasing, consumption is increasing, and GDP is increasing. And we expect this to continue.
So I think, explosion in screens, explosion in content and good growth of economy, really augurs well for sports. And sports is under penetrated, so the head room for growth is better than for any other part of the portfolio of our business.
In closing, I’ll return to cricket. The MCC World Cricket Committee, in a survey just published, argues that cricket fans prefer Test matches over limited-over formats. With all due respect to the wise men in the committee, that is a premise at odds with the reality on the ground. Would you agree?
There is no doubt that T20 is the format of the future. But there is also no doubt that for some years to come, among some loyal audiences, Test cricket will continue to have meaning.
And staying with the subject, what is Star’s position on the ICC’s attempts to bring context to Test cricket with the World Test Championship?
The attempt of the Test championship is a good one to help revive the format and give it some context.
Adding context, stature or rivalry in sports broadcasting helps in fan engagement and grows the sport, so this will be advantageous for us.
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