Disney-Star to Sony-Zee: Why broadcasters are competing for IPL rights

The upcoming bids for broadcasting and digital rights promise to be more intriguing because of the structure of the auction and new cash-rich entrants

On June 12, the country’s largest broadcaster Disney Star faces a tough defence of its crown jewel — the broadcasting and digital rights for India’s most coveted sports property, the Indian Premier League (IPL), which it has held for five years.

For Disney Star it’s a tough call — the base auction price at Rs 32,890 crore is double the 2017 payout. Some predict that the price tag will hit Rs 50,000 crore for 74 matches each season. Spends at that level are closer to the total box office revenues generated by multiplexes in the country in a good year; or enough to make more than 100 high-budget blockbuster movies.

Disney executives have already downplayed the importance of IPL. In an interview, its India president, K Madhavan, said sports accounts for 3 per cent of Disney Star’s network share, so it will not indulge in a price war and buy only if the deal is viable. He also said it was incorrect to claim that Hotstar survives on cricket. Dis­ney’s Chief Executive Officer Bob Chapek reiterated that local content is being developed and will mitigate the impact for Disney if it doesn’t win the IPL rights.

The fact is, however, that IPL also provides Disney Star millions of streaming customers putting it way ahead of other over-the-top (OTT) platforms. Elara Capital estimates that one-third of Star’s revenue (digital and TV) comes from IPL. And the broadcaster admits that it controls 15-20 per cent share of sports advertising on TV across all channels and 65 per cent of sports viewership among TV viewers.

IPL is important for Disney globally, too. In its latest analyst call, Disney acknowledged that Disney+ direct to consumer service (which includes Disney+ Hotstar) added eight million paying streaming customers worldwide in the April quarter, of which half came from India due to the IPL season. Disney+ had over 138 million paid streaming customers in April globally but 36 per cent of them came from Disney+ Hotstar, the bulk from India. The question is whether the global giant, which is looking to hit 230-260 million paid users by FY24, can afford to miss having IPL in its closet.

Against this, Disney has to contend with the reality that returns from streaming are abysmally low. Disney+ Hotstar’s average revenue per user (ARPU) on April 2, 2002, was just $0.76, though it represented a 55 per cent jump over last year. Compared to that, ARPU in the US and Canada combined is $6.32, though that’s just a 5 per cent growth. Disney said it will spend over a third of $32 billion on content for sports, so it has to clearly work out the math on whether it should put up a tough fight to regain what is a growth market like India where cricket is the biggest passion.

The fact is that viewership has waned in this year’s IPL, not least because the introduction of 10 teams makes it a very long-drawn tournament. Viewership fell 12 per cent in the second week of the tournament and the playoffs have not pushed up numbers. From some eight million subscribers classified as heavy users of IPL, spending 1,200 minutes on the tournament in the past, the number has dwindled to a third at 2.7 million.

Still, these numbers have not deterred the competition, which promises to be tougher because of the structure of the auction and new cash-rich entrants.

Viacom 18, which has been far behind its competing broadcasters, is one of them. The company’s TV market share is around 12.8 per cent, less than half of market leader Star Disney at 29.1 per cent and the Zee-Sony combine at 26.9 per cent. It has been working quietly to enter sports, setting up a sports channel, building a management team, acquiring some significant sports rights, and also roping in James Murdoch and former Star India boss Uday Shankar as investors. Shankar, former Star boss, knows all about IPL. He was able to grab the rights successfully despite tough competition from his new partners Reliance and big boys such as Facebook and Google in 2017.

Digital players also see an opportunity — Amazon Prime and Google have also bought the documents. And the Sony-Zee combine (which will have to bid separately as the merger will be legally completed only by September) could well spring a big surprise. If they win, it would catapult them much ahead of Disney-Star. And Sony, which already has a significant portfolio of international cricket rights, will get a huge leg-up with IPL.

The Board of Control for Cricket in India (BCCI), which owns the IPL, has also tweaked the auction to maximise earnings. It has invited bids for four packages, and the winner of the TV rights has the right to rebid for the digital rights and better that of the winner (that is, if it is not the winner for the latter). On the other hand, the winner of the digital rights (with rights for all the matches) can also rebid for the new non-exclusive digital rights, which includes 18 key games with a lower base price, and better the highest bidder in this category.

“The tweak ensures that one player has the option to take all key rights through the rebidding option,” said a top executive of a leading sports company. “This does two things. One, it optimises revenues and, two, allows one player to take all rights. That will make it even more unviable for the rights holder to make money but very profitable for the BCCI and, of course, the team owners who will make huge profits.”

But this structure also perhaps could give digital players an opportunity to pick up the non-exclusive matches and make an entry (the rules do not permit them to bid as a consortium for both TV and digital rights). The base price in the auction here is only Rs 16 crore per match (for 18 matches) or half of what a company that has rights for all matches has to pay. Analysts say the limited match package could also be a smart proposition for big broadcasters like Disney Star and Sony-Zee to bag if they want to keep spiralling cost of cricket content down on their books but still get viewership. No doubt, the cricketing world is set for an interesting game of chess on June 12.

Why IPL rights are important for broadcasters in fray

Disney Star

Will help it retain the top 

slot in TV and streaming in terms of paid subscriber market share
 

Viacom 18

Will help it grab market share and move up from its current number three spot behind networks Disney Star and Sony-Zee in terms of subscribers. Will strengthen its streaming platform Voot
 

Sony-Zee

Will help it end Disney Star’s long dominance and become the number one in linear TV as well as in streaming. Once the merger is approved, the gap between the two will shrink. Plus, Sony already has rights for many key cricket tournaments
 

Amazon, Google

Will give both a big toehold in cricket to monetise on their digital platforms Amazon Prime and YouTube, respectively. 

Have a choice to buy rights for all matches or 18 key matches