Indian cricket, English Premier League, Formula 1 - Star India will soon be one of the biggest sports broadcasters. Could upping the game in what looks like a stagnating sports market hurt the profitable entertainment business?
Star India has been unusually aggressive in chasing the sports business. Last year, it paid the Board of Control for Cricket in India, or BCCI, a whopping Rs 3,851 crore, or $770 million, for the media rights to all international cricket matches played in India and for domestic tournaments such as the Ranji Trophy. These cover 96 matches between 2012 and 2018.
Around the same time, its parent, News Corporation, bought out ESPN's share in a pan-Asian joint venture ESPN-Star Sports (now Fox Star Sports Asia) for $220 million. Once the buyout is operational, Star India will own the rights to almost all Indian cricket and to the English Premier League, Formula 1 and Wimbledon, among others. The only big tournament it doesn't have is the Indian Premier League, or IPL, the 54-day cricket hoopla being currently played.
But, last month it nosed its way into IPL by becoming an associate sponsor on rival Sony's MAX. In the same month, the Bombay High Court, on an appeal from Star, barred telecom operators and value-added service, or VAS, providers from offering live updates of the scores of BCCI matches. Star owns the digital rights too. All telecom and VAS operators now need to take a licence from Star or can give a score update only 15 minutes after Star broadcasts it. That is a lot of jostling in the macho sports market from a company better known for its tear-jerkers. What is with Star and the sports business?
One part of it is a larger News Corporation design. Sports has been a focus area ever since Chase Carey took over as deputy chairman, president and COO of Rupert Murdoch's $33.7 billion media empire in 2009. News Corp has bid billions of dollars on football, basketball and other sports in the US and will be launching the much-awaited Fox Sports 1 in August this year. The idea is to take on the estimated $10-billion ESPN's 30-year-old hegemony over the market in the US. News Corp believes that sports can be the "locomotive" to get better revenues from its dominating pay TV platforms. It also de-risks its entertainment and news-led television business.
That is the thinking in India too. At Rs 3,700 crore, Star India gets almost all its money from entertainment. At an estimated Rs 4,000 crore in advertising and pay revenues, the sports market is a nice slice of the Rs 37,000-crore television market in India. So it makes sense to gun for a share of the pie. That was roughly the idea when it joined hands with Disney's ESPN in 1996. But, "historically they (Star) felt hamstrung in India and Asia by ESPN," says Vivek Couto, executive director, Media Partners Asia, a Hong Kong-based consulting firm. Hence, the News Corp-led independent push.
But, and here is the first catch, over 90 per cent of the Rs 4,000 crore that television makes on sports, goes to cricket. "India is not a sports market, India is a cricket market," says R C Venkateish, CEO, Dish TV ). "We follow Indian cricket only, in India, and when India is winning," adds Vinit Karnik, national director (entertainment, sports and live events), GroupM. At roughly two per cent of all TV viewing in India, the genre of sports (read cricket) has been stagnating in growth. (See charts.) The realisation on every ten seconds of advertising time sold has been flat for about three years and rose only marginally this year. A large chunk of Star's investment is in cricket, a category that looks mature. What is it betting on? On expanding the market for all sports, including cricket, and on better pay revenues post digitisation, retorts Uday Shankar, CEO, Star India.
The second catch: according to MPA's analysis, while ESPN had a fat topline at Rs 1,875 crore in 2012, it was not profitable. The merger and its entry into sports could pull down Star's healthy 30 per cent operating margins, thinks Couto. How does it plan to protect its core entertainment business? "Margins will come under pressure. But we are not doing this for tactical reasons. We are in this business for the long haul. Just like we have built a robust entertainment franchise, we will build a sports one," says Shankar.
"If we are such a cricket crazy country, why is only two per cent of the viewership coming from cricket? The fundamental problem is increasing the number of people who watch the sport," says Shankar. He points to three things that could help. One, having a content strategy that leverages the marquee events, like the World Cup, to build more consistent viewership. "A lot of people watch EPL. But very little is done to leverage that and increase soccer consumption," says he. Neeraj Vyas, executive vice-president and business head, MAX, and the man running the IPL show for Sony, agrees. He points to Extra Innings, Sony's attempt to "wrap things around cricket," as he puts it.
Two, using more languages. "Why is all sports broadcasting done in English?" asks Shankar. It is a thought. Almost all growth across media - in print, TV and radio - is coming from Indian languages. Shankar says that when ESPN-Star Sports started using Hindi commentary in cricket it got a 40 per cent jump in viewership. Vyas disagrees. He reckons Indian language commentary doesn't do as well. Three, developing cricket and non-cricket sports. Shankar is exceptionally bullish about domestic cricket, which he says is not leveraged enough by broadcasters. He points to the US where school, college and university league matches in basketball or football attract bidding and viewers. Star is currently partnering with NDTV on university cricket. "We are very focussed on building cricket across the country. The whole thing can't rest only on the back of 11 players," says he. Vyas has his doubts. "For domestic cricket to be popular it has to become day and night," says he.
How much will all this expand the market? If the total number of sports viewers moves from the current 207 million to even 300 million, the jump in advertising revenues should be in double digits.
"In all other content there is a repeat value, but with sports everything has to be live," says LV Krishnan, CEO, TAM Media Research. That makes sports, just like movies, a pay revenue-led category. You need one large tournament on the back of which the business could be built. "The BCCI rights will become a channel driver along with the other properties that ESPN-Star Sports has," says Karnik. Star could then create an entire bouquet of sports channels. Once digitisation is complete even a Rs -10 price on a channel could bring Rs 1,200 crore in pay revenues from say 100 million homes. (India has 153 million TV homes)
Not everyone is so bullish. "In their anxiety to get rights, broadcasters have pushed up costs beyond the economic value that can be derived. Ultimately there is only so much elasticity in advertising. There is already a 100-200 per cent premium on rates. Would the advertiser pay 300 per cent?" asks Venkateish. Satyajit Sen, CEO, Zenith Optimedia, points to the list of advertisers on IPL this time - from Micromax and Karbon to Honda and Panasonic. He reckons that as long as the celebrities of cricket play, the game will get eyeballs and advertisers. "There is some exhaustion because cricket numbers haven't increased. But they haven't gone down either," points out Vyas.
Then there is the whole issue of how much pay revenues will deliver given that India is a price sensitive market.
In 2000, Star changed the rules of entertainment with its massive bet on Kaun Banega Crorepati. It is now trying to do the same with sports. This game is far from over.