interview with Star India CEO Uday Shankar
rights great opportunity to build Star's sports
on 4 September 2012
India CEO Uday Shankar, conqueror of TV news and entertainment
business, is ready to wage a new battle in sports broadcasting.
the BCCI rights came up for grabs after the abrupt termination
of contract with Nimbus, Shankar quickly pounced upon
it. He tiptoed in, surprising hot contender Sony to
pocket the prized rights to telecast international cricket
in India from 2012 through 2018. His winning bid: a
whopping Rs 38.5 billion.
believe in the power and value of cricket as content
in India. By acquiring the BCCI rights for telecast,
we think it is a great opportunity to create a new business,"
timing couldn't have been better. A couple of months
later, joint venture partner Disney agreed to sell its
50 per cent stake in ESPN Star Sports, allowing Star
to aggressively build and expand the sports broadcasting
business in India.
"Drama and cricket are the two big pools of content
that the masses love to watch in India. We are already
a key player in entertainment. Now we can have independent
charge over the sports broadcasting business,"
has placed huge bets on digitisation that would plug
leakages in subscription revenue and dramatically increase
the paying subscribers to broadcasters. "In the
current construct, those rights are not profitable.
The market is primarily so unattractive because of the
theft and leakage in subscription revenues. Digitisation
would enable content owners to get a better share of
the subscription revenue," he avers.
the first part of the interview with Indiantelevision.com's
Shankar talks about Star's game plan in sports broadcasting,
the rise in acquisition costs, the huge opportunity
that digitisation would throw open and the need to build
a robust subscription income.
Q. Why did News Corp. and Disney end their 16-year-old
joint venture partnership in ESPN Star Sports (ESS)
when it allowed them to lead the sports broadcasting
business in Asia?
When the discussions started two years back, it
was not on a buyout proposal but on how to take ESS
forward in a changed market environment. The sports
business was under financial pressure and both partners
were worried. The Champions League T20 rights (for $975
million) did not bring much value. Acquisition prices
were rising and competition was not helping stem it.
This later turned into the need to go separate ways
but the possession of the rights over sporting events
made a split in the properties complex and impossible.
obvious course was to acquire the entire 50 per cent
stake of the joint venture partner and be the sole owner.
The deal took time because Disney had to take the final
call on whether it wanted ESPN to exit from Asia.
Q. When Star bid for the BCCI rights on its own,
had Disney agreed to sell or it was an act of defiance
to build a sports broadcasting business outside the
We were still discussing the future of ESS when
the BCCI rights came up for renewal. And because there
was no clarity on the future of ESS, we could not come
to an understanding on what its position would be on
BCCI. We at Star knew the strategic value this property
would add to our thriving entertainment business. We
expressed an interest that in case ESS was not clear
and since the bid had a final deadline which was approaching
fast, Star would go ahead and bid for the rights as
in the JV agreement, this kind of provision was there
that either party (ESPN or Star) could go and bid for
the rights. However, they could not use the rights on
their own without the approval of the other party. So
we agreed that instead of letting BCCI go away to a
competitor, Star would bid for it as a one-off and then
assign the rights to ESS in case they wanted it. If
ESS didnt want, Star could go ahead and broadcast
it. So thats how it happened.
Q. Did the BCCI rights tilt the deal in your favour
as we understand that even Disney had expressed an intent
to acquire News Corps stake in ESS (though they
had made heavy investments in UTV and were looking at
consolidating that business)?
The two are not linked. We were very clear that
it would be a one-off bid (for rights). Now lets
assume that Disney had bought out ESS. Then they would
have definitely insisted on a non-compete agreement
and we would have had to find a way of handing over
BCCI. I dont know what would have happened; thats
a conversation one can only speculate on. But if Disney
had chosen to play in the sports market here, then they
would have definitely tried to also get a piece of the
Q. When you realised the strategic value of the BCCI
rights, did the fear of Sony haunt you as it had the
lucrative IPL (Indian Premier League) rights and its
entertainment business was on the upswing?
Of course, it was an important consideration. It would
have made Sony a very formidable player in the sports
space. And we were then not present in that space; we
were only an entertainment company.
also knew that there were a few others like Ten Sports
and BCCL (Benett Coleman and Company Ltd) who had bought
the tender documents. All of them were key competitors.
And anybody who had the cricket rights would have a
serious strategic weapon.
that wasnt why we decided to go for the BCCI rights.
We definitely believe in the power and value of cricket
as content. It gets the largest number of viewers across
all target groups. We also genuinely believe that there
is an opportunity to improve the quality of cricket
on TV. And we thought the best place to start that would
be the BCCI rights.
the current construct, those rights are not profitable.
Our big punt is in digitisation'
Q. Was the bid of Rs 38.51 billion on the higher side?
You would bid only what is the rational value of
the tournament and not beyond reasonable limits. In
fact, Sony and our bids were pretty close; it clearly
tells you that there was a consistent logic that both
of us were applying.
must appreciate that nobody had the time to plan for
it because it happened suddenly. BCCI (rights) wasnt
on Sonys or anybodys horizon. It was comfortably
settled with Nimbus; they were holding the rights for
almost six years and they were going to have it for
several years more. If anybody says it was part of their
serious strategic consideration, that wouldnt
be correct. How can you plan for something that is not
available in the market? But when it came up for grabs,
everybody thought it was a great opportunity. And we
definitely thought of it is as a great opportunity to
create a new business.
Q. But since it was unplanned, you could have overestimated
the value of the property? Or how did you arrive at
a right value?
There was a reserve price that BCCI had indicated
and based on that we did the mathematical calculations.
The ad rates for India cricket matches per 10 seconds
and the kind of distribution revenues that can be earned
are available in the market. So based on that we did
Media analysts say those numbers wouldnt make
up for the bid amount unless digitisation happens. Did
you bet too heavily on digitisation when you did the
In the current construct, those rights are not profitable.
The market is primarily so unattractive because of the
theft and leakage in subscription revenues. More than
Rs 150 billion gets collected from the ground in form
of subscription income. But the net off carriage fees
that comes to the broadcasters and content owners is
a small fraction of that.
big punt is that in the next couple of years when digitisation
moves significantly forward, a lot of that would change.
The leakages would have been plugged, there would be
more fair and transparent business processes. And that
would enable content owners to get a better share of
the subscription revenue.
nowhere in the world has sustained on advertising revenue;
that is a small part of it. Wherever it makes money,
it makes it on the back of subscription income. And
that is what we are hoping would happen in India as
Q. Since Star has a very strong entertainment broadcasting
business, will the network power not enable you to push
up advertising rates for your sports properties?
You cant move that synergy to up the ad rates
much just because you have more properties under your
belt. The target audiences and the set of advertisers
are different. The big advertisers on sports, for instance,
are telecom and auto companies. General entertainment
channels primarily address a female TG.
you cant play much on network strength. We have
not factored in any dramatic upside in advertising revenues.
Lets face it; ad rates cant go beyond a
certain level of elasticity.
Are you expecting ARPUs (average revenue per subscriber)
to climb with digitisation of cable networks?
No, I am not factoring in a tremendous increase
in ARPUs. India is always a value conscious market and
cricket is a mass market product. There would, of course,
be some people who have the ability to pay higher value.
But most people wont pay that kind of money.
is also enough competition in the market which would
ensure that the ARPUs dont go beyond a certain
limit. What we are looking at is the big shift in cable
that should happen. In case of transparency, we clearly
see a visible link between the subscriber base and the
Q. What sort of paying subscribers would sports broadcasters
If the whole country goes digital, you are talking
about 120-130 million C&S homes in the next few
years. Even if you say 60 per cent of the entire universe
goes cable, you are talking about 70-75 million C&S
8-9 million paying subscribers for sports currently
under analogue cable would go up significantly. Sports
is driven by events. But at any time, the genre would
be attracting 60-70 per cent of the total subscriber
base. I think that is the ratio that DTH (direct-to-home)
had been relatively less competitive in India
because the two big players were together. Now
since ESPN and Star have parted ways, the next
5-10 years, will see a new round of competitiveness
and aggression in the sports market'
After having acquired the BCCI rights for such an aggressive
price, will Star match that aggression for the upcoming
cricket boards that will be up for grabs within a year?
We neither choose to nor can afford to be over aggressive.
If we are also aggressive, then rights prices would
shoot up. Now it is Sonys and Ten Sports
turn to be aggressive.
Q. Do you see acquisition prices climbing further?
If the competitive norm stays, then there will definitely
be a tendency for the acquisition prices to go up. A
lot, however, depends on how the distribution market
pans out. If the distribution market continues to be
so leaky and porous and cable stays largely analogue,
then even the current prices will be unsustainable.
However, if the digital transformation happens and if
there is a matured digital distribution market that
comes up, then definitely the prices will go up.
Even if Disney decides to come back after the two-year
non-compete period is over and India continues to have
I am not too sure if it continues to be analogue,
how many players would be interest. That is the biggest
stumbling block. But on the other hand, I also think
analogue cable will not survive even if the current
digital initiatives fail to go through; analogue will
dies on its own. This is a funny market. The analogue
experience is poor and the number of channels that the
consumers can watch is very few. The cable operator
doesnt pay taxes; nor does he pay fair value to
the content owner. How long will the society tolerate
this kind of a distorted model?
Consumers are probably tolerating analogue cable because
the ARPUs are low?
The ARPUs are not that low. How much does DTH charge?
You cant charge beyond a certain reasonable price.
What you can charge consumers also depends on affordability
and the kind of value that they attach to it. Price
doesnt escalate in isolation; there has to be
a realistic basis.
certain areas of Mumbai, cable subscription is Rs 300-350
per month. In low income areas, people are paying less.
ARPUs are not uniformly low. That will happen in a digital
Q. Cant acquisition prices for cricket rights
go up because of strategic value that the property brings?
No mature media company will pay irrationally high
for strategic reasons unless this can translate into
business value. If they do that, they will go bankrupt.
There are a couple of media companies who are prime
examples of that. There is a company that launched an
entertainment channel and decided to go completely crazy
for what they thought was the strategic value. The strategic
value worked so well for them that they had to sell
out. The news companies have gone ahead and spent so
much money on all kinds of distribution, etc. We know
the financial mess they are all in.
think anybody would pay obscenely high just because
it has strategic value. Star would not do that; nor
would Sony and Zee. If BCCI prices were double this
and tomorrow if IPL is available for three times more,
would I go and buy those rights? No way. I dont
want to go and acquire rights and be sacked or drive
my company bankrupt.
With the current distribution of cricket properties
across sports broadcasters, what sort of dominance will
It is very difficult for anyone to have any kind of
very big position in market share, let alone dominance.
In this market, every sector of broadcasting and media
is so competitive. Whether it is entertainment, news
or regional, one thing that we have seen is that there
is new competition coming in every day.
anything, sports all these years has seen less and less
of competition in India primarily because there was
a JV between ESPN and Star. Until IPL came, it was just
ESPN-Star. Sony had a game only because it got the IPL;
without it, it would have been a marginal player. Ten
Sports continues to be a marginal player except for
a few rights they have like the South Africa and the
Sri Lanka boards.
broadcasting requires heavy investments. And not everybody
may have the appetite to take big risks unless you are
a Zee or Sony, specially because the distribution deals
are so uncertain.
ESPN and Star have parted ways, it is only a matter
of time that Disney and ESPN will come back to India.
So I think over the next 5-10 years, you will see a
new round of competitiveness and aggression in the sports
market. Sony has launched a sports channel; they will
have to really work hard to build that and will need
more rights. I am sure they will surely bid aggressive
for whatever rights come up. Ten Sports will also be
forced to bid for a few more rights if they want to
stay competitive in the game. You saw how expensive
their bid was for the South Africa rights. The price
they paid was pretty high and they got it.
had been relatively less competitive in this country
because the two big players were together. That phenomena
is set to change.
Q. But in UK you have News Corp as a big player and
ESPN as a much smaller player. Wouldnt India replicate
Those are very settled markets and even there that
is not quite the case. In India tell me one sector of
media where one single player sits with 50 per cent
share. When it started, that may have been the case.
About 20 years ago, Zee had a large share. Then Star
came and build a large share in Hindi entertainment.
See how competitive the market is today.
Take regional. The only market where one player continues
to build a very big share is Sun network in Tamil Nadu.
And we all know the reasons behind that. But if its
a freee market, then it is difficult for anybody to
take a 50 per cent or a 40 per cent share. Very, very
is an emerging market. So global attention is on this
market. Media, despite all the softening, is still delivering
the second largest growth rate in the world year-on-year.
And that will continue to be the case for a long time.
The most attractive growth rate market is not available
so easily for media. China does not allow media that
easily. So where can you dominate ? India has a huge
consumer base; you are talking of 120-130 million C&S
homes. Incomes are going up. I think there will be more
and more people coming in.
media companies are looking at India primarily because
they are not getting growth in their own markets. More
and more large Indian companies are stepping in. You
have seen what has happened in the last 2-3 years. Big
Indian corporates have made their foray into media.
Reliance Industries Ltd (RIL) and Aditya Birla have
come into media. I think media is going to get more
and more competitive. And no matter how much money you
might have, no matter how aggressive you might be, I
dont see a situation where anybody will be able
to build a 50 per cent share in any vertical.
Q. Since Rupert Murdoch had said that IPL was a big
miss, would Stars next big stretch be on acquiring
its rights when it becomes available in future?
Of course, it was a big miss. I dont even
know what the contractual agreement between Sony and
BCCI is. They may have a preferred access to renew it.
But if it comes up and continues to be a strong property,
then we will surely be interested. We have seen a little
bit of softening in IPL and hopefully thats temporary.
But the renewal is long away and it would depend on
what BCCIs price expectation is at that stage.
Q. Do you see cricket viewership plateauing?
Cricket viewership depends on a variety of things.
First and foremost is the nature of the tournament.
Following immediately afterwards is the performance
of India. I think there is a value to be obtained from
quality of TV broadcast can make a big difference to
how much the viewership can grow. Sports broadcasters
generally have done a very good job of providing a professional
cricket experience to the viewers. But it seems to have
only rule of content and that applies to drama,
sports, news, anything is that the sameness brings
in fatigue. And there is a certain amount of sameness
that seems to have settled in sports. That is the reason
why cricket viewership might be peaking. If we can disrupt
that sameness, bring in innovation and fresh approach
to connectivity, to visual and to graphics, I think
given the passion that cricket generates in this country
only sky is the limit for viewership. When cricket is
played in every nook and corner literally, how can you
say that the viewership has peaked. I think the viewership
can grow a great deal more provided we continue to grow
and build on the experience that we can provide. And
there the broadcasters and the boards can do a lot more
Are you talking of introducing doses of entertainment?
No, I am not suggesting that. You cant turn cricket
into soaps; you have to stay true to the sport. But
within that, you have to innovate. And there is so much
of technology to be used - you see what has happened
in the last 10-15 years! New graphic technology has
come in and the kind of replays that we get to see only
can enhance the viewing experience. You can further
enhance that experience a great deal more.
is about pushing the limits. If you continue pushing
the limits, you will further enhance the consumer engagement.
regulation has only discouraged clean, legitimate players
in DTH & cable
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