Comment: With IPL rights Uday Shankar gambles audaciously, must plan pragmatically

The numbers were close to what we at were betting on. In conversations with senior executives from various companies, we had predicted that the telecast rights to the Board of Control for Cricket in India’s (BCCI)’s Indian Premier League (IPL) would fetch it around twice the price that Sony had earlier coughed up. And that too for a rights period which has been halved as compared to Sony’s time.

Star India’s bid of Rs 16,347.50 crore ($2.56 billion) lived up to that expectation. Sony had last paid Rs 82,000 million ($1.6 billion then) for the rights. In rupee terms that’s close to twice what was earlier paid.

Of course, the key execs in Star India – led by chairman & CEO Uday Shankar – have good reason to pop the bubbly. They bested a slew of broadcasters, telcos, OTT players and more experienced global sports rights owners to the IPL rights tape with an offer that may appear  mindboggling – nay mind numbing - to many an industry observer.

Star India, however, got through by what many might say is a thin whisker. The combined highest individual bids for all the rights on offer including India, digital, ROW A,B,C,D, E totted up to Rs 15,8195 million, whereas the 21st Century Fox owned network’s global bid for all rights was Rs 16,3475 million --- a difference of just Rs 5000 million. A seasoned industry observer like Kunal Dasgupta, former head of  Sony Entertainment in India, said Star hasn't bid too high --- if one takes into account the combined figure of bids of others.

Star India led the individual bidding for only one territory – the UK. Elsewhere its rivals bid higher. So, if Star India had not safeguarded itself by putting in a global bid, it well may have been sitting on the losing side with telecast rights only for old Blighty.

However, it is on the winning side now. And media watchers are questioning whether  Shankar and his team have  bitten off more than they can chew. The network is already anteing up Rs 430 million a match since 2012 for telecast and digital rights to all international cricket that India plays. Thankfully, the Rs 38,510 million deal ends mid-2018 when the IPL-Star era begins.

But who knows the broadcaster might make its pitch for the same rights once again. If one goes by its hunger to create and own Indian sport, one can expect a spurt in prices for the rights to international cricket featuring India too. So much so that the Rs 550 million per IPL match it is now committed to pay out may look relatively cheap. As things stand today, India cricket rights are cheaper than theIPL's--- and that says a lot about a league that has been valued at a shade over $ 5 billion by an international company.

That’s for another day. Clearly, new benchmarks have been set with the new IPL deal. For Shankar, it is a calculated gamble that may actually help him raise his stocks within the 21CF family. Star is clearly pulling out all the stops in India. As are his bosses Rupert, Lachlan and James Murdoch. Because it is something they have been used to doing. Up the stakes and keep a stranglehold on sport that viewers cannot do without. Monetising it effectively comes later; remember Kaun Banega Crorepati, the Indian version of Who Wants To Be A Millionaire.

In 2015, the UK’s monolith satellite operator Sky (21st Century Fox owns 39.14  per cent of Sky and is seeking to own completely through its December 2016 offer of pounds sterling 11.7 billion) agreed to fork out £4.176bn to keep hold of the maximum possible number of English Premier League matches – 126 – in the new three-year cycle, almost double the £2.28bn it shelled out in 2013. That worked out almost £10.2 million (Rs 844 million per game). So doesn’t Rs 550 million look cheap?

Sky had signed a cheque of just £191 million for rights to the EPL (60 matches a year) from 1992 to 1997 – a steal at £0.6 million per match.

In  July 2017, the leading UK DTH player  raised the stakes even further by launching an English Premier League channel, which would air the 126 matches as part of an initiative to revamp its sports channels. Ten of its sports channels were available at £27.50 per month, whereas individual channels could be subscribed to at £18 a month.

Will Star go for a similar spin-off play in India?

Will it launch an exclusive IPL Star Sports channel with debates and coverage of what the various teams and team owners are doing?  And biopics around some of the main players in the teams? Can it start a talent hunt to zoom in on cricketers who could play in the IPL? Can it create special programmes, format shows around the IPL? Sure the creative ideas are many, and many of them could end up being money spinners as well as duds. A lot of this has not been attempted before and is new territory for all, but Star India knows how to enchant viewers with its programming. However, one expects a lot more from it then just bringing TV characters and actors from its top shows onto the field for some of the ceremonies - something it did when it was the India team sponsor.

Or will the network go for a simpler idea--- broad base its telecast across its TV channel network with regional language commentary? Will it work with the BCCI to bring in further entertainment or excitement into cricket?

While some may question Uday Shankar and team’s thinking behind paying out such a fat purse, clearly there’s some arithmetic and growth strategy in place. Shankar admitted to that when at a post bidding press conference he hinted that the winning bid seemed the "right" figure keeping in view the competitiveness of the bidding by others. Star India has displayed what many considered derring-do when it took the path to develop very local Indian sports like kabaddi, not to mention badminton, table tennis, football and other sports in India. But it has had the last laugh; especially with kabaddi that has found traction and is emerging as a money-spinner.

With the world as his playground and the rights to digital and television globally at his disposal, expect Shankar and co to do magic. In one market the Star India team could sell the rights to a telco for the live feed, in the same market,  it could sell it to a VOD player for a delayed telecast and also sell it to a broadcaster there for pay TV or run a pay TV channel. In the UK, it has got a ready buyer in the Sky Sports cricket channel, which it launched along with  EPL Sports.

The IPL teams have got representation from several cricket and emerging cricket playing countries; so the interest is bound to be there. And, if it is limited, Star and local partners will work to whip up the excitement.

Otherwise, it could use the fun and action on the IPL cricket field to seduce subscribers in various countries to opt for its VOD and streaming service Hotstar. It has just about begun its global journey for Hotstar with its launch in Canada and the US a couple of days ago.

The VOD platform has been blanked out in all other nations apart from these two and India. Viewers in these markets are used to paying – even if it is only a monthly fee of $9.99 to $13.99. In Indian rupees that is a lot of money: around Rs 650 to Rs 800. If Star manages to lure in even five million paid subscribers, at those levels it will generate an average of a whopping Rs 100,00 million annually per three month IPL season. Over a five year period it can expect its total subscription pie to grow to Rs 65,000 million in digital revenues from just Hotstar. Of course, one has to calculate expenses and operational costs. But then it will also rope in ad revenue too for the service.

It is in India where it will seek to really exploit the IPL magic. Television advertising and subscription revenues,  premium VOD revenues for both live and delayed feeds – as well as ad  commercial sales  revenues on the free basic Hotstar service. Or, it could license the live digital feed to a social media network or a telco. Remember Facebook, Airtel and Reliance Jio bid in excess of Rs 30,000 million for the India digital rights alone. If any of them bite when Star makes them an offer, it would secure the broadcaster’s India’s revenue to some extent at least. Star well might keep the free delayed feed in house and stream it on Hotstar or sell even that to another player. The opportunities are mind-boggling.

Of course, the big money monster is clearly going to be TV in India for the next five years, and even 10 or more, possibly. And that’s where Star India will go in for the kill.  The Indian cable TV ecosystem is evolving. However, cable TV operators and DTH players have been wary of raising subscription rates as well paying more for the content to broadcast partners.

Though, through cricket, Star may look at building a walled garden --- something that competitors have hinted at --- the success or failure of it could only be gauged by a future time. As they say, hindsight is a great teacher.


Star bids highest for BCCI's IPL media & digital rights and is the winner

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