After spending over Rs 17,000 crore on broadcasting rights, it has got into sponsorship now in order to strengthen its connection with the sport
Star TV has so far forked out over $2.9 billion (Rs 17,800 crore) in buying cricket broadcasting rights, which has made it the undisputed leader in the segment. Now, it wants to go one step forward by grabbing sponsorship rights of cricket tournaments. The reason is simple but elegant: it wants to position the Star brand in such a way that it becomes synonymous with cricket in India. Last week, Star TV just did that when it won the title sponsorship rights for all the 13 international cricket matches to be held in India between October 2013 and March 2014 by agreeing to pay Rs 2 crore a match. It was a steal; Star TV was the only bidder and paid 39 per cent lower than what Bharti Airtel had forked out to win the rights last year. It will be the sponsor as well as the broadcaster of these matches.
It's, of course, the second time that Star has decided to tread beyond broadcasting. Last year, it paid a hefty Rs 100 crore for three years to become an associate sponsor of the popular Indian Premier League (IPL), gaining a backdoor entry into the only major cricket property whose broadcasting rights are with a rival: Sony. Explaining the strategy behind the dalliance with title sponsorship, Sanjay Gupta, chief operating officer of Star TV India, says: "We are betting big on sports, of which cricket is the most dominant content. There is a big potential to expand its share of total viewership. We want to identify Star closely with cricket. That is why, apart from broadcasting rights, we are now getting into sponsorship of the game."
Star TV is the biggest cricket broadcaster in India-the hub of world cricket. Its nearest rival, Sony, has spent $1.6 billion to acquire broadcast rights, but has only one property in its kitty: IPL till 2017. Star TV says it has over 40 per cent share of all the key cricket matches and tournaments which are held in the country and also of India-centric matches held abroad. It has at an average 70-100 days of India-centric cricket in a year. The number goes up to 137 days if international cricket in which India is not taking part is included; however, the viewership of such matches is limited to 4 to 5 per cent of the total viewership. Sony, with IPL, has less than 60 days of cricket.
So why is Star TV putting so much money into the game? After all, many critics say that the spot-fixing scandal that broke out during last year's edition of IPL has had an adverse impact on cricket viewership, which was evident in the last few matches of the tournament. Many broadcasters have burnt their fingers in cricket. Neo Sports, for instance, was forced to give up the broadcasting rights for international matches in India after it had made huge losses, according to analysts. According to ICICI Securities, Zee reported a negative Ebitda (earnings before interest, tax, depreciation and amortization) of Rs 87 crore in 2012-13 from sports. Also, with the broadcasters totally at the mercy of the Board for Control of Cricket in India for content (it even forced Sony to renegotiate the IPL deal upwards after its success) it is not a very secure business to be in. Worse, analysts watching Star TV say the huge investment it has made in cricket will impact its margins, at least for the next few years.
But the risks come with immense potential for growth for those who have the cash to stay put. To begin with, despite the criticism and fears, cricket constitutes over 10 per cent of the annual TV advertising pie (currently estimated at around Rs 14,000 crore), or Rs 1,400 crore, and in 2011, when IPL and the World Cup were held, it raked in over Rs 2,000 crore in revenues. Also unlike general entertainment channels (which draw 60 per cent of their revenues from advertising), subscription constitutes for over 60 per cent of a sports channel's revenue. So, more viewers mean more revenue through subscription.
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