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IPL & Rs 3,300 crore revenue: Thoughts to ponder

The NFL SuperBowl generated $600 million in revenue; the IPL deserves a spike in ad spends.

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MUMBAI: Can an Indian broadcast TV network imagine that it could gross $600 million in revenue– that is about Rs 4,200 crore - in one day?

That would indeed be the day.

The fact is the Murdoch-owned and run Fox did earn that from 100 advertisers on Sunday 2 February 2020 when it aired the NFL’s SuperBowl match between the Kansas City Chiefs and San Francisco 49ers. It did attract an audience of 150 million, which watched the pre-game coverage, the game, the electrifying half time performances by Latino bombshells Shakira and Jennifer Lopez, the post game discussion in the studio, followed by the factual show The Masked Singer.

Speaking at an investment analyst post earning conference call Fox executive chairman & CEO Lachlan Murdoch said: “We surrounded the Super Bowl with an immersive and innovative programming lineup from Miami across Fox Sports, Fox News, Fox Sports 1 and our local stations. And we use this enormous platform to launch Season 3 of the Masked Singer right after the game which became TV's highest rated reality telecast in eight years. We delivered extraordinary ratings for our advertising, distribution and NFL partners.”

In India, the big events that aggregate audiences are the IPL and any cricket match that the Indian team is involved in. IPL 2019 delivered 462 million viewers on the Star network channels between 23 March and 12 May, according to BARC data.

So, the NFL had a 150 million strong audience, generating $600 million in rvenue for Fox. That's a realisation of $4 or around Rs 300 -  per viewer. Ad spots on the NFL SuperBowl cost about $175,000 per second, with a 30-second spot costing as high as $5 million plus. According to measurement company SpotTV,  the cost per lead (CPL) for the NFL SuperBowl 2018 was between $27 and $100 on game day. Seems high, but advertisers obviously think its worth as this is the day America worships.

The IPL, according to media reports, generated around Rs 2,200 crore for Star India in 2019, with a cumulative TV audience of 460 million. Now let’s apply the $4 average realisation in revenue per viewer that the NFL managed to get from advertisers and other partners to this audience. It works out to a whopping $1.8 billion or Rs 12,300 crore.

But you might say we are being silly, that we are extrapolating a highly developed US ad and TV market to an emerging market like India. Right. Let’s shave that to a $1.50 per viewer, which is what we think it should be, it still works out to a jawdropping $690 million or Rs 4,918-odd crore. You might again say we are bonkers once again. Let’s bring it further down $1 per viewer – it tots up to $460 million or Rs 3,300-odd crore. Currently, the IPL is generating around 60 odd cents per viewer.

Can that be pushed up to $1 per viewer? That's something Disney and Star India head honchos Uday Shankar and K Madhavan are betting on. So far, advertisers and agencies have not been valuing the IPL and its audiences enough. Remember, the IPL was valued at around $6.8 billion last year. Its valuation will go up undoubtedly this year. Currently, advertisers are paying between Rs 10-15 lakh per 10-second spot (barely $13,000 to $20,000 as compared to the $175,000 per second for the NFL SuperBowl) during the IPL.

Star India paid $2.55 billion to acquire the rights to the IPL in 2017 for five years.  At that time, it spent around Rs 54.5 crore per match. Add production and promotional costs, it would have to recover anywhere between Rs 60-75 crore per match.

Something has to change on ad spends in India. The thinking amongst brand and marketing managers, media buyers and planners needs to undergo a revision, a refresh. Going for the lowest price, slashing media rates, need not get you the best results. As the saying goes: you pay peanuts, you get monkeys. Some media planners and brand managers say they buy clever and they buy cheap and they get their return on investment.

Sure. But premium content costs. The IPL set back Star India by some Rs 16,347 odd crore for five years. That means it has to recover around Rs 3,500 odd crore from advertising and subscription revenues each year. So far, it has had a gap in the first three years. But that has not deterred it from taking the television component of the IPL up a notch each year.

Star India’s Uday Shankar is focusing on consumer experience and delight. The network has invested in raising the standard of the quality of production, providing more language feeds. Thankfully that has been accompanied by drastic improvements in the quality of play in the various matches, as well as the competition becoming interesting.

But all this has to be monetised, right? The economic slowdown has led to cuts in ad spends. And when advertising is down, the visibiliy of those who dare to advertise goes up. And they end up capturing consumer mind space.

This year, the IPL presents advertisers with a great opportunity. Indian cricket has been shining over the past few months, snatching impressive victories. And cricketers like Rohit Sharma, Virat Kohli, Shreyas Iyer, and KL, Rahul, Jaspreet Bumrah, Mohammed Shami, Ravinder Jadeja have been in top form. They will be playing for various teams in the IPL. They have taken the fight to the enemy camp and won handsomely in some matches. Expect them to continue in the same vein in the IPL as well.

We keep talking about how India is set to emerge as one of the world’s leading economies. Yes, it has its own peculiar way of conducting business, which is so very Indian. But slashing costs, taking ARPUs down and playing the mass game is not the only mentality that should come in play. Opening one’s wallet and investing for the now and the future would definitely make sports TV broadcast rights more viable. 

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