IPL media rights: Winner Star TV will now have monopoly over cricket

The CEO of the BCCI, Rahul Johri, had predicted before the IPL media auction that the rights would fetch Rs 18,000 crore. He was not far wrong. The winner, Star TV, on Monday picked up the 5-years broadcast and digital rights for an eye-popping Rs16,348 crore to stump out incumbents Sony who held the rights of the IPL since its very inception 10 years ago, having bid Rs 8,200 crore in 2008. 
 

The initial tender documents had been picked up by 24 entities: Star India Pvt. Ltd., Amazon Seller Services Pvt. Ltd., Followon Interactive Media Pvt. Ltd., Taj TV India Pvt. Ltd., Sony Pictures Networks Pvt. Ltd., Times Internet Ltd., Supersport International (Pty) Ltd., Reliance Jio Digital Services Pvt. Ltd., Gulf DTH FZ LLC, GroupM Media India Pvt. Ltd., beIN IP Ltd., Econet Media Ltd., SKY UK Ltd., ESPN Digital Media (India) Pvt. Ltd, BTG Legal Services, BT PLC, Twitter Inc., Facebook Inc., DAZN / Perform Group, Discovery, Yupp TV, Airtel and BAM Tech and Oath (Yahoo). Of these, only 14 showed up yesterday at the auction. Prominent amongst those missing were e-commerce giant Amazon and microblogging site Twitter. Also missing from the lineup were Discovery, Yahoo and ESPN Digital. Group M, the media buying company, who were expected to bid on behalf of a consortium of clients, gave it a miss. 
 

The highest bid for the broadcast rights came from Sony Pictures Network. They bid Rs 11,050 crore. The highest bid for digital rights came from none else but Facebook who placed an offer of Rs 3,900 crore. Telecom operators Airtel and Reliance Jio were not far behind Facebook, bidding Rs 3,280 crore and Rs 3,075 crore, respectively. Star actually lagged in each category bid, offering Rs 6,196 crore for broadcast rights and a mere Rs 1,443 crore for digital rights. But eventually, Star proved to be the smartest bidder, and a winner, with a global bid of Rs 16,348 crore that beat the sum of the highest bids in individual categories which totaled Rs 15,820 crore. Star walked away with all the rights and full honors, laying claim to 300 days of cricket over 5 years, at a price tag about Rs 54.5 crore a match.

Also read: Media rights auction: STAR India ends Sony's IPL innings

This includes 1a. Indian Sub-continent Broadcast (TV) rights
1b. Indian Sub-continent Digital rights. And Rest of World (ROW) media and digital rights for 1. Middle East 2. Africa 3. Europe 4. USA 5. Australia and New Zealand.

Compared to the Rs 43 crore per match that it currently pays to the BCCI for India’s international matches in India, this is a 20% increase, which on the face of it is not such a major issue perhaps. But the sheer size and scale of the overall Rs 16,348 crore bid have left many media watchers gasping for breath.
 

What are the key issues with the Star bid? 

1. Did Star pay over the top? 

2. Will Star now have a monopoly over cricket?

3. Will the market support the increased prices for advertising?

4. Are digital rights as valuable? 

5. Are ROW markets as monetisable? 

6. Will the game of cricket gain from this hyper bidding?

Let us address each of these issues one by one. 
 

1. Did Star pay over the top? 

Star bid Rs16,348 crore against the Rs15,820 crore sum that was the total for the highest bids in individual categories. This consolidated Star global bid was just a teeny-weeny 3% higher but sufficient for Star to pip Sony, Facebook, Airtel, Jio and other smaller players to the post. Star’s bidding strategy was flawless. And bang-on. 
 

2. Will Star now have a monopoly over cricket?

Star will certainly have a monopoly till next year when the India international rights come up for bidding again. Star already has all the ICC rights which includes the World Cups and Champions Trophy etc. Jawahar Goel of Zee had in the weeks preceding the auction raised this issue of monopoly fearing Star’s enhanced clout in ground distribution that could help force both MSOs and DTH operators for higher levels of ‘declarations’. This is certainly a possibility. Goel of course wrote to the Competition Commission and to various other government bodies, none of whom showed much interest in his petition. For now, Star is assured 60 days of cricket a year, and in years like 2019 when the World Cup takes place, playing days could exceed a 100.
 

3. Will the market support the increased prices for advertising?
 

There are two schools of thought on this. One school of thought says that the BCCI has been far more effective and efficient in extracting value from clients. They demonstrated that by getting VIVO to pay Rs 2,199 crore for the title sponsorship of the IPL, a whopping 554% increase over the previous price. Media agencies have however worked at cross purposes to broadcasters in obtaining the same kind of rate increases for broadcast sponsorships and ad-spots. But an aggressive and monopolistic Star could manage to extract massive jumps in rates because relevant advertisers have no choice but to buy cricket for male and youth audiences. The second school of thought says that Sony’s spot rates for IPL 10 hovered around Rs 5.5-5.75 lakh per 10 seconds. To meet its revenue targets, Star will need to touch Rs 15 lakh per 10 seconds which is unheard of in this country. Similarly prices for digital will need to go up 3-400% for a meaningful recovery for Star. My belief is that Star will be able to push-up prices substantially. Media agencies have exercised negative influence for far too long. If they continue to obstruct Star, they may find themselves ruled out of the equation with the client.
 

4. Are digital rights as valuable? 

On that the answer, is a simple yes. The fact that Facebook who have never spent a penny on content so far, stuck their neck out with a Rs 3,900 crore bid means digital eyeballs are extremely valuable. That both Airtel and Reliance Jio bid over Rs 3,000 crore each means very simply that both considered getting cricket an important route to creating subscriber stickiness. Star has successfully run the digital rights of the IPL through Hotstar for the past 3 years. Last year the revenues of Hotstar were in excess of Rs 200 crore. Were Star to forge an alliance with one of these telcos and then intelligently ensure that simple apertures like SMS updates are duly monetized, the overall digital package could end up in positive territory for Star. 
 

5. Are ROW markets as monetisable? 

ROW (Rest of World) are lucrative markets, especially for cricket. The biggest opportunity in overseas markets is pay TV. And prices for that can be very very good for relevant content. For people of Indian origin and for those from the Indian sub-continent, cricket is the big opiate that keeps them connected to their homes. Many years ago when I used to head Zee, I took the live broadcast of the morning prayers from the Golden Temple to UK, Canada, Australia and to lesser markets like the Middle East, Far East and the US just for Sikh audiences. The pay revenue from these markets literally doubled. Cricket is a much larger and far wider offering. Star is sure to use its global presence to monetise ROW to the hilt. 
 

6. Will the game of cricket gain from this hyper bidding?

It is to this question that I have no clear answer. The onus will be largely on the BCCI as Star the broadcaster will now concentrate more on recouping the value of its bid, than do much else. BCCI can do lots with the huge moolah that it has raked in. The recent success of women’s cricket is a clear opportunity area. BCCI can also do well to support U-19, U-16 and U-14 to create better pipeline for Indian cricket. Trophies like Duleep and Cooch-Behar have lost their relevance in recent years. They need to be brought back to glory. Despite the widespread interest in cricket, facilities and infrastructure in smaller cities and towns is still abysmal. BCCI can certainly use all the media money to do more than just pamper member associations and IPL team owners. 
 

I think Uday Shankar and his team at Star TV have done themselves proud. The bid has been strategically well priced enough to just be a head ahead of competition, no more no less. Uday is also a seasoned veteran, having run Star now for 10-years. He knows full well the entire gamut of monetizing sponsorships, ad-spots, distribution and global rights. Those who fear the Winners Curse for Star are just being needlessly negative. 
 

In the net analysis, I feel sorry for Sony Pictures. They were the highest bidders for the broadcast rights but they never understood how the bidding game was all about maximizing the sum of the highest bids in each category through a winning global bid. Poor chaps even bought Ten Sports from Zee. They even franchised the ESPN brand-name for India. Some say a consortium with Amazon had been in the pipeline. If any, Sony has to fear the Losers Curse if there is some such damnation. For now, Sony has a long long journey ahead. They will surely miss the Mexican wave and the cheerleaders next summer at the IPL.

Sandeep Goyal is former Group CEO of Zee Telefilms and ex-Founder Chairman of Dentsu India.