Winning IPL's media rights: Star India’s relentless strategy
By Gurbir Singh | Express News Service | Published: 11th September 2017 12:50 AM |
Last week, Star India created a sensation in the sports and media world by audaciously whisking away the broadcasting and media rights for the crown of cricketing encounters – the Indian Premier League (IPL) from under Sony’s nose.
It was a hard-fought battle. There were 14 bidders including Facebook and Airtel; and of course Sony Pictures Networks (SPN), which wanted to continue holding on to these immensely popular rights. Star’s strategy of putting in a global consolidated bid of Rs 16,347 crore for five seasons paid off as it was higher than the sum total, Rs 15,819 crore, of the highest bids in each of the categories of broadcasting and digital rights.
The growth of IPL is mind-boggling. Sony, which held the broadcasting rights earlier, had paid Rs 8,200 crore for 10 years. For five years, Star is paying almost double or four times the valuation a decade ago.
Effectively, this means an average cost of Rs 54 crore for every 40-over match! Cricket in general and IPL, in particular, have attracted big eyeball numbers and, therefore, huge advertising revenue.
But, for the buyer of these rights, is there profit to be made? It’s obviously not a game for the faint-hearted. International sports programmer ESPN threw in its towel quite a while ago and exited cricket broadcasting.
Nimbus Communications and Neo Sports channel, which held the BCCI rights till 2012, could not make ends meet and had to abdicate in favour of Star. Zee, which had bought Ten Sports struggled for years in sports programming, and finally sold all its cricketing properties to Sony a year back.
This has now left just two players in the field. Star is ahead now with both IPL and BCCI rights for cricket played at home, and England and Australia; while Sony has been pushed to a distant second with a few circuits like West Indies, Pakistan and Sri Lanka via its acquisition of Ten Sports.
Star’s sports strategy
Star winning the IPL rights is not a one-off fluke. It is part of a well thought-out business plan to put sports and cricket in the driver’s seat. Its first big move was to acquire BCCI cricket rights till 2018 outbidding others for Rs 3,851 crore. For IPL, which Sony thought it had it all wrapped up, Star campaigned and succeeded to have the ‘right of first refusal’ clause dropped which favoured Sony after the 10-year contract expired.
Star has made no secret of betting big on sports and cricket. It announced in November 2013 it would be investing Rs 20,000 crore to expand sports coverage in India. Cricket was not the only action.
Star launched Pro-Kabaddi in 2014; and despite sniggers, made it the second highest watched sports with a huge fan following. It was a business gambit that paid off and revived a virtually dead Indian sport.
The sport's focus is driven by the belief that live cricket and other sports programming has evolved into a highly popular form of entertainment.
Although live sports events command hardly 4-5 per cent of TV viewership, they can be monetised into billions of dollars, provided they are marketed well and competition is driven out.
It was a lesson learnt when Rupert Murdoch’s satellite platform BSkyB joined hands with the English Premier League two decades ago to make football in England become an addiction and a business monopoly; and it made billions for Star’s holding company, NewsCorp.
Credit for Star’s success in India must go to company chairman Uday Shankar too, who brought in an ‘Indian’ soul into the network with properties such as Pro-Kabaddi.
Will Star make money?
Will Star make money on these very expensive rights? On IPL, Sony was breaking even by the third year. In the 10th and last season ending May 21, this year, Sony’s IPL revenue crossed Rs 1,300 crore and subscription revenue was close to Rs 500 crore.
For Star, a crucial piece of the game will be increasing digital revenue from its app-based ‘Hotstar’, which garnered Rs 120 crore for the last season. With an increasing shift to watching matches on mobiles and other digital gadgets, this could rise to as much as Rs 800 crore per season.
Independent estimates suggest Star may begin to make a stand-alone profit from sports programming only post-2020. But, Star’s strategy is obviously not about returns here and now. It is to gain control over the very large viewership of live sports events, and monetize it in years to come.
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