Sports broadcasting: A sticky 2012 wicket


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(Written By Ashwin Pinto in 2013. He continues to write on sports television and English Entertainment)

Posted on : 02 Feb 2013 08:41 pm

Sports broadcasters ensured that live sports remained attractive in 2012. Even as the revenue side looked tough, prices touched the roof as Rupert Murdoch‘s News Corp and Sony were willing to bet more. Zee-owned Ten Sports did not lose ground and retained the cricket rights that came up for renewal. Neo redrew its strategies and decided to stay away from the high-cost cricket rights.

A number of key cricketing properties came up for grabs. In most cases, however, the incumbent broadcasters ended up retaining the rights despite strong competition.

The entry of Multi Screen Media‘s (MSM) much awaited sports channel Sony Six only exacerbated the situation on the acquisition front.

Owning the lucrative telecast rights for the Indian Premier League (IPL), MSM‘s keenness to add other key properties like the Board of Control for Cricket in India (BCCI), England Cricket Board (ECB) and English Premier (EPL) only helped jack up the prices.

The keenly contested BCCI media rights were bagged by Star India for Rs 38.51 billion till 2018. MSM, which had bid Rs 37 bilion, lost the rights by a whisker.

Another case in point is the ECB rights which were retained by ESPN Star Sports (ESS) for $200 million till 2019. ESS had earlier secured the rights for $80 million.

However, it was not just cricket that saw record money being splurged on acquiring rights. Football, too, had its share of penny. ESS retained the English Premier League (EPL) rights for three more years but not after committing a mind-boggling $145 million. In the previous three-year cycle it had committed $46 million.

While it is true that an aggressive Sony Six had the incumbent rights holder on its toes to retain the rights at any cost, it is also true that the sports broadcasters had the impending digitisation as part of their plan while making the bids.

Digitisation was the key theme for sports broadcasters because subscription is the way forward. Sports broadcasters in India, like their counterparts elsewhere, are still heavily dependent on ad revenue while subscription revenue is still inadequate to correct the lopsided business model that has taken a toll on their P&L.

While the broadcast industry will be waiting with bated breath to see which way the digitisation piece moves, no one knows better about the significance of the exercise other than the sports broadcasters.

Even as the broadcasters splurged money on acquiring rights, certain rights like the New Zealand and Bangladesh cricket rights did not find any takers since the broadcasters saw little value in them. NZC rights were earlier held by MSM while Bangladesh rights were with Nimbus Communications.

Away from the big properties, the new sporting leagues too found favour with broadcasters who are happy to partner the rights owners in building these leagues that have potential to become big in future.

ESS acquired the global media rights for Hockey India League (HIL) that was launched with much fanfare as a rival to Nimbus Sport and Indian Hockey Federation‘s (IHF) World Series Hockey (WSH). The five-team HIL is a Hockey India property with the backing of International Hockey Federation.

The IPL fever spread to other countries with Sri Lanka, Bangladesh and Pakistan coming with their own IPL-styled leagues.

ESS, which had lost out big time by not bidding for the IPL rights in 2008, went all out to acquire the rights for Bangladesh Premier League (BPL) and Sri Lanka Premier League (SLPL). The Pakistan T20 league is expected to take off in 2013.

Ten Sports, which has been airing local tournaments like Chennai Open and I League, acquired the rights of Elite Football League of India (EFLI) that finally kicked-off after a period of uncertainty.

The broadcaster also holds the rights for i1 Super Series which is in limbo due to the exit of co-promoter Anjana Reddy, all thanks to the financial mess that her family-promoted media company Deccan Chronicle finds itself in.

Ten Sports further fortified its territory by renewing rights with West Indies Cricket Board (WICB) for a period of seven years. In 2011, the sports network had renewed rights for South Africa and Zimbabwe.

The challenge for Ten Sports would be to protect the Sri Lanka and Pakistan cricket rights in the face of an aggressive Sony Six which is looking at having some cricket properties outside the IPL.

In line with its strategy of having specialised sports channel, Zeel launched Ten Golf, a pay-driven channel priced at Rs 200. With Ten Golf, Zeel has five sports channels in its bouquet which includes Ten Sports, Ten Cricket, Ten Action+ and Ten HD.

Six, the sports entertainment channel from MSM, has identified Ultimate Fighting Championship (UFC) and National Basketball Association (NBA) as the properties with which it plans to build its sports channel.

What about Neo Sports? The Nimbus Communications-promoted sports network has not thrown in the towel yet while at the same time agreeing that meeting revenue targets in an analogue environment has been challenging.

After losing the rights for India cricket, it is focusing on non-cricket sports which saw the cricket-focussed channel Neo Cricket being rebranded as Neo Prime.

The broadcaster had Asia Cup and Uefa Euro 2012 as its saviour as it reworked its distribution deal with TheOneAlliance.

Neo Sports Broadcast COO Prasana Krishnan says, "We are focusing on five sports- tennis, soccer, badminton, hockey and golf. Euro was our first major non cricket event and it was a good experience. We had renewed our deal with One Alliance for two years. We had also re-branded Neo Cricket as Neo Prime. Earlier if you did not have cricket, you were switched off. However, in a digital world this content has more value which is why we are present on all the DTH platforms despite the absence of cricket."

Bundesliga is currently the main driver property for Neo apart from Badminton World Federation (BWF) events. The broadcaster is also experimenting with Raj Kundra and Sanjay Dutt promoted Super Fight League (SFL).

Krishna believes that with digitisation the rights of non cricket will fetch more money as broadcasters see the opportunity to unlock value. "But we will not go madly after rights. We will take properties if it makes business sense. There is no pressure on us to acquire properties. Our current deals are long term."

News Corp‘s big-bang sports play in India

The biggest development of the year was News Corp‘s acquisition of ESPN‘s 50 per cent stake in ESPN Star Sports, thereby bringing down the curtain on the 16-year old joint venture that was formed with the intention of exploiting the nascent Asian market together.

ESPN got $335 million for its 50 per cent stake in the company that valued ESS at $770 million. The deal meant ESPN‘s exit from the Asian market with a two- year non- compete clause. ESPN‘s presence is limited to digital products like ESPNcricinfo and ESPNFC amongst others.

The divorce saw veteran sports broadcasting executive Peter Hutton take charge of ESS replacing the long serving Manu Sawhney who moved to iconic football club Manchester United as director.

Star India, under whose watch the sports broadcasting business is expected to fall in India, has become a formidable player in the Indian market. Minus IPL, Star and ESS own the four big ticket cricket properties like BCCI, England, Australia and ICC rights.

Ad spend at Rs 19 billion

On the ad revenue front, the genre degrew to Rs 19 billion from Rs 21 billion in 2011 with the absence of the 50 over World Cup. The year, however, had bi-lateral home series against New Zealand, England and Pakistan in addition to the ICC Twenty20 World Cup.

According to GroupM Maxus Client Leader Jigar Rambhia, cricket delivered well for advertisers and the rates across the three formats held steady.

As far as non cricket events were concerned, the Olympic Games stood out. "It helped advertisers build brand saliency. India won six medals which earlier had not been expected. So companies that were present benefited," says Rambhia.

The IPL saga

For a sports broadcaster, the IPL continues to be the most lucrative property with a high return on investments (ROI).

Even from a sponsors point of view, the IPL delivers value notwithstanding controversies happening off the field. Cola major Pepsi‘s bid of Rs 3.96 billion for the IPL title rights is a testament of IPL‘s value. The amount is almost double of what DLF, which decided not to renew the costly IPL sponsorship deal, was paying.

In fact, it was IPL‘s value proposition that made Southern media conglomerate Sun TV bid Rs 4.25 billion for the Hyderabad team. The bidding was necessitated following the termination of Deccan Chargers from IPL after a prolonged legal battle.

While the BCCI found itself in healthy position selling its properties at record price, the same cannot be said about the franchises except for teams like Mumbai Indians, Chennai Super Kings, and Kolkata Knight Riders.

The King XI Punjab team, which had earlier expected to breakeven in the fourth year, will only do so next season thanks to the legal fight. The good news though is that the dispute with the BCCI has been resolved. It has to pay a fine of Rs 10 million which is basically a slap on the wrist.

Brand Finance India director Unni Krishnan, however, maintains that the valuation is very much in keeping with the trends being seen.

"The IPL ecosystem‘s long-term value has been steadily coming under pressure and is tracking back to its base value of $2 billion from the heights of $4 billion. Further the Deccan Chargers team had come under a cloud due to misconduct and poor governance, in a sense mirroring a lot of ills which the IPL as a whole faces," he says.

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