Hotstar central to Star's back-loaded bid to retain BCCI rights

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MUMBAI: Star India is now officially the one-stop shop for all big-ticket cricket played in India after the 21st Century Fox subsidiary retained its hold on BCCI rights for the next five years with a winning bid of Rs 61.381 billion. 

Star's bid for the global consolidated rights to Indian cricket amounts to an average per match value of Rs 601.77 million for the 102-game BCCI FTP for the period 2018-2023. 

Star had already brought the Indian Premier League under its wing last September when they won the global broadcast and digital rights for the T20 extravaganza with a bid of Rs 163.475 billion.

In both cases (BCCI and IPL rights) it was rival Sony Pictures Networks India that came so close but remained oh so far! For the record, Sony's last bid before throwing in the towel was Rs 61.1859 billion at an e-auction that took three days to decide a winner.

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In a post on Star India's Twitter handle, Uday Shankar, chairman and CEO - Star India & president 21st Century Fox, Asia, tweeted: “Star India is excited to continue its deep association with Team India and Team @BCCI to bring this amazing sport of Indian cricket to over a billion fans across the world. 

“Cricket is special, but when Team India plays in front of Indian fans, it becomes even more special. That's why winning these rights again gives us a very special feeling. We see this as an important milestone to build India into a sporting nation with cricket at the heart of it all.”   

The deep association comes with a deep cost. Breaking it all down, there are some salient points worth noting. 

First is the bidding threshold the three players in the race - Star, Sony and Reliance Jio - had set for themselves. A top industry source who confirmed to SportzPower on Wednesday that Star India had set Rs 65 billion ($1 billion) as its "upper circuit breaker" was clearly right on the money. And Shankar alluded to it as well when he indicated during the media briefing that the winning figure was well within the outer limit of how high Star was willing to go.

If Star's outer limit was Rs 65 billion, Sony's was clearly Rs 60 billion, so that essentially leaves Reliance Jio. BCCI CEO Rahul Johri offered no comment to a direct query from SportzPower asking to know what was Jio's last bid before calling it quits. Our educated guess is Rs 50 billion, which also happens to be the number that this website had calculated as the no profit, no loss threshold in terms of value extraction potential from these rights. 

If we are correct in our analysis, Star stands to lose Rs 11 billion over the five years that the rights will run. Or maybe not.

It needs noting that Star has back-loaded its bid in such a way that over the first three years of its rights tenure (2018-2021), the per-match payout to BCCI is only a little over the Rs 432 million that the network has been paying during the current cycle. In the final two years (2021-2023), however, there is a massive increase. Broken down, the per match payout over the five years looks like this: Year 1 - Rs 460 million; Year 2 - Rs 470 million; Year 3 - Rs 465 million; Year 4 - Rs 774 million; Year 5 - Rs 789 million.

For some additional context, according to the future tours programme, BCCI is expected to host 18 matches in Year 1, 26 in Year 2, 14 in Year 3, 23 in Year 4, and 21 in Year 5. 

So how will Star service the commitments in Year 4 and 5 is really the billion rupee question. The answer SportzPower believes, lies in the massive growth expectations the network has for its OTT platform Hotstar. Over the next three years, with Reliance Jio leading the charge towards penetrating mobile connectivity across the length and breadth of the land, happening concomitantly with the steady improvements in bandwidth quality, Hotstar's subscriber numbers are expected to grow exponentially.

Star will be looking to leverage the massive pull factor that IPL and BCCI cricket provide as a combo to increase Hotstar's average revenue per user (ARPU) steadily over the first three years and once critical mass has been achieved, to massively up the game on paid subscriber numbers in Year 4 and 5. When SportzPower posed this premise to Shankar, he pointed out that it was not just from Hotstar (digital) they were expecting exponential growth, but from television subscription as well.  

The back-loading of the bid certainly provides the much-needed buffer for Star. And keeping in mind that the network's threshold bid number was Rs 65 billion, Shankar and his strategy team appear to have come away from the three-day e-auction without having had to "break the bank" as it were.

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