What Does Star India's Winning Bid For IPL Mean For Sports Broadcasting In India?

No one will be making any money betting against Star,” remarks Sir Martin Sorrell, CEO of WPP, commenting on the broadcaster’s recent win of Indian Premier League’s (IPL) global media rights, including television and digital. Outbidding 24 competitors that included some of India’s largest companies and global giants, Star India is going to shell out Rs 16,347.5 crore for the next five IPL seasons.

True it’s a staggering figure, but not very shocking compared to the Rs 8,200-crore that Sony Pictures Network (SPN) had to cough up for the property ten years ago, even before it had proved its mettle. That said, unlike the earlier deal that was for a 10-year term, Star will be paying double the amount for half the duration. If IPL’s sustained delivery and growing value or the sheer inflation in India in the last decade are all factored in, this is still not a number to be taken lightly — with a cost of nearly Rs 3,269 crore a year or Rs 54 crore a match, Star India will be paying three-and-a-half times more than what SPN did.

Star India CEO Uday Shankar, however, asserts that “it is a dramatic figure, but it is not abnormal.”

It’s the IPL after all. During its bidding process, the league’s popularity was further reiterated when about 24 companies joined the rights war. In addition to the incumbent SPN, other bidders included Airtel, Facebook, Times Internet, Reliance Jio, beIN Sports, SuperSport, YuppTV, Gulf DTH, BAM Tech, Econet Media Group, Perform Group, and Followon Interactive Media. The others who were interested but did not eventually submit their bids comprised Amazon, Taj TV, Gulf DTH, GroupM, Media India, Sky UK, ESPN Digital Media, BTG Legal Services, British Telecommunications, Twitter and Discovery.

The presence of digital players led to a massive surge in pricing this year. “It was a big surprise that two telecom companies and one social media company chose to write such a big cheque for content. They had bought the tender, so it was anticipated, but it was still surprising,” comments Shankar. What didn’t surprise him, however, is other’s bidding strategies. “Most players had identified their areas of interest and put every dollar that they had behind them,” he says.

Star’s strategy was quite different; the bid was designed to lose individual categories, but to win the overall rights. It was going for all or nothing.

The Mind-Boggling Money

Just about every media analyst and observer has spent the last two weeks making sense of the Rs 16K crore figure, and decoding what this latest deal means for Star. The channel also  has the broadcasting rights for the ICC Tournaments for a period of nine years, from 2015 to 2023, bought for about Rs 11,800 crore. And another year of BCCI (Board of Control for Cricket in India) media rights for matches played in India, before the contract lapses.

While Shankar isn’t very keen on sharing the details on managing all the cricket in Star’s kitty, if the channel’s way of working in the past is any indication, in all likelihood it is perfecting what is already a well-laid out plan. And there’s no doubt that it can manage it all.

Around six years ago, when Star won the BCCI rights at Rs 3,851 crore,  Rs 43 crore per match, the deal was also seen as an extremely aggressive move. But it knew what it was doing.

In the period since, Star has only further increased its interest in sports. It has created a war chest of over Rs 25,000 crore, committing to develop several more sports in India.

The Star Advantage

The two factors that will be advantageous for Star in monetising IPL are: the growing digital component, and the fact that it has won the global media rights.

Digital rights for IPL this year witnessed fierce comp-etition with five bidders including Facebook, Airtel, Reliance Jio and Times Internet, apart from Star, in the fray. While Facebook made the highest bid of Rs 3,900 crore for the digital rights of IPL, it was not enough to win the rights. In fact, Star India’s bid for the digital rights was the lowest at Rs 1,443 crore. In comparison, Airtel bid Rs 3,280 crore, followed by Reliance Jio’s Rs 3,075.72 crore and Times Internet’s Rs 1,787.50 crore. The overall value of digital rights has gone up from Rs 300 crore in 2008 to Rs 3,900 crore in 2017, almost a 13-fold increase.

The access to global media rights will also ease out some pressure on the broadcaster, since it can leverage the property in other cricket-crazy nations.

Distribution revenues will have a role to play as well. According to industry reports, Star Sports’ distribution revenue in 2017 was Rs 1,500 crore, but now with IPL in its kitty it is expected to increase by another Rs 1,200 crore.

While these are major components, a bulk of its money will have to come from advertising. IPL’s advertising revenue in 2008 was Rs 400 crore, which later increased to Rs 1,300 crore in 2017.

The ad rates are expected to go up way further. Some media agency chiefs are even expecting a 10-second TV ad spot rate to climb to Rs 15-17 lakh from Rs 6 lakh in 2017. While Star has been cautioned that advertisers will absorb rate increase only up to a certain point, in all fairness, the picture on this will be clearer only by next year.

It’s No Monopoly

Just prior to the bidding process, some raised concerns around Star gaining an “absolute monopoly” in cricket rights in India. The argument was made on the fact that Star had BCCI and ICC. And now with IPL added to its portfolio, many insinuate that it would have “complete control”. Not many industry professionals are refuting this line of thought. But Shankar calls this an “uninformed argument”.

“Essentially, we have only two major rights that we will have for a while — ICC and IPL. Of the two, ICC does not happen every year. For instance, there is no ICC tournament in 2018. Our BCCI rights will lapse in less than six months. Given the aggressive competition from media, telecom and global technology companies, who will have those rights is anybody’s guess,” says Shankar.

He explains further that Star India used to have the English Cricket Board rights and the Cricket Australia rights, both of which have lapsed. It does not have the South African board or Sri Lanka rights. “I am not even counting other minor rights such as West Indies, etc. There is a lot of cricket that we don’t have which is out in the market or with other broadcasters.”

This debate could go on, but there is no refuting the fact that IPL may just be the boost that Star needed towards profitably realising its sports ambitions in India.  

IPL – A Story of Rise & Rise

Over the years, IPL has grown phenomenally. If we look at the numbers, in 2008, Sony acquired IPL rights for 10 years for $918 million. Then again in 2009, the company re-acquired rights for $1.63 billion for 10 years after renegotiation. According to global valuation and corporate finance advisory Duff & Phelps, IPL in its tenth year is worth Rs 34,000 crore ($5.3 billion) and has posted a 26 per cent increase in its overall business from Rs 27,000 crore ($4.2 billion) last year. The league has seen a three-year CAGR (compound annual growth rate) of 13.9 per cent.

Stating that IPL is going to be fuelled by raw money-power from now on Harish Bijoor, founder of Harish Bijoor Consults Inc.,says, “The money generated in terms of IPL broadcast rights will wake up all and sundry. The ambitions are going to grow exponentially. At this stage of evolution of the sport format of IPL cricket, greed is good. You will see a lot of it around.”

The combination of sporting icons and film stars on a single platform is another factor that makes IPL a mix of sticky content, especially in a country where cinema and cricket are not just watched but revered. IPL was designed to offer a family package, including something for everyone. It has today bulldozed its way into the two most profitable months (given school vacations are on and advertisers are more inclined to spend at the start of the financial year) of April and May.

Says Saurabh Uboweja, CEO & chief brand strategist of Brands of Desire, “IPL will continue to be important for the Indian audience. It is India’s most valuable sporting brand and now competes successfully with the top 10 sporting leagues of the world in terms of viewership, brand valuation, media rights and marketing rights. The popularity of IPL is unlikely to wane over the next five years; rather its success will inspire other sporting leagues in the country as it has already done, and will do good to the overall sporting infrastructure of the nation. The competition from other sports will be positive competition; India needs at least five other IPL-like leagues to positively impact the sports culture of the country.”

Today, IPL has transformed into a formidable platform that can launch new brands, while the existing brands get maximum bang for every ad dollar spent. What also attracts brands to this platform is the sure shot way to maximise their return on investment. Two examples are Vivo and OPPO. These Chinese mobile manufacturers were unknown a few years ago, but courtesy IPL, the brands have become household names. IPL’s reach makes it attractive, irrespective of the cost.  

‘Too much cricket is a myth’  

Did it again’ was perhaps the most widely used statement when Star India won the IPL global media rights for the next five years. Without question, Star India CEO Uday Shankar surprised many with the broadcaster’s all-or-nothing strategy for IPL media rights. Now with the ICC, the IPL and one more year of BCCI India matches in its pocket, Star at least has a problem of plenty, if not a monopoly in cricket rights. In a conversation with Ruhail Amin, Shankar speaks on the IPL bidding and winning experience. Edited excerpts:

What was your biggest fear while the bidding process was on?

In a bid, you submit a sealed tender, and no matter what, it is all done and dusted. But when you walk into a room and see that global and Indian technology and telecom giants are sitting and participating in the tender, you do know that it’s going to be a tough one. Our strategy was a very high-risk one, where we had designed our bid to lose each of the individual categories. We were very concerned because we knew that it was something where we could either get all the rights or lose it all.

Clearly, you won it all. With the ICC, the BCCI and now the IPL rights, some are even looking at it as a monopoly. How do you view it?

That is not factually correct. The first indicator is that the concern was raised by people with vested interests, who have competitive agenda. But if you look at the cricket landscape, it is also an uninformed argument. Essentially, we only have two major rights that we will have for the next few years — the ICC and the IPL.

Of these, the ICC does not happen every year. For instance, in 2018 there is no ICC tournament. The BCCI rights that we acquired six years ago, will lapse in less than six months. This is the last BCCI season we have the rights for. Given the aggressive competition from media, telecom and global technology companies including social platforms, who will have those rights is anybody’s guess.

We used to have the English Cricket Board rights, the Cricket Australia rights, but they have both lapsed. We don’t have the South African Board or the Sri Lanka Board rights. I am not even counting others such as West Indies and so on. There is a lot of cricket that we don’t have, which is out in the market or with other broadcasters. The whole argument has no basis.

Coming back to IPL, what makes the property so successful?

I would say a combination of a few things. T20 is the most attractive format for cricket fans — both serious and also marginal cricket fans. It’s easy to understand, it’s short, gets over in three hours and so on. Moreover, outside of the World Cup, it is the only format, the only tournament, where the best of Indian and global players participate.

Over the last few years, it has built a deep connect. Each of the teams and franchises has built a deep affinity with the local population. People in Mumbai genuinely see Mumbai Indians as their team, and Delhites see Delhi Daredevils as theirs. An emotional bond has formed that was otherwise only with the Indian national team.

Finally, it really helps that it happens at a fixed, convenient time in the evening, when most people are back home and look for entertainment. Given that it is cricket, men, women, young, old, all can come together and watch it. That’s what makes it what it is.  

Can other sporting leagues impact IPL? Is there a fear of cricket overdose?

The power of cricket has become bigger; IPL this year was bigger than any previous year. It is a myth that there is too much cricket. The likes of test matches have very niche audience. There are a few bilateral ODIs. The English Premier League is just one league that goes on for 35 weeks in a year.

My submission is that there is not enough cricket at multiple levels, rather than there being too much cricket. And the more people watch the sport, the more they play and vice-versa, it’s a virtuous cycle. We expect that with all the leagues, all the sports, cricket will benefit.

There are all kinds of speculations about Star India’s approach to recover the money. What is your game plan?

You have to step away from the rhetoric and look at the facts. Why do you need to benchmark IPL with the price it was sold 10 years ago? It was an untested property then. Those who got the rights were lucky to get them. Presently, a T20 game of BCCI goes for Rs 43 crore, a test match goes for Rs 43 crore, and even those rights were tendered six years ago. Today, if the BCCI rights go on a bid, they will go at a higher price for sure. So if you use relevant benchmarks, the inflation isn’t that dramatic. It’s just that everybody is looking at the price at which something was sold a decade ago. Anything that was sold 10 years ago would look a lot more expensive if you went to buy it today.