Did Disney-Star make the right decision by paying an exorbitant price to buy broadcasting rights for ICC tournaments?

Did Disney-Star make the right decision by paying an exorbitant price to buy broadcasting rights for ICC tournaments?

Disney Star has paid around $3.04 billion for the ICC rights.


MUMBAI: The year 2022 has been action-packed for cricket lovers. It was a busy year with several interesting things happening throughout that appealed to fans.  The renewal of rights, e-auctions, tender process and so on were some of the important events that occurred recently. In a recent development, the broadcaster Disney-Star drew immense public attention for winning the media rights to telecast International Cricket Council (ICC) tournaments till 2027. It has been one of the top bidders and for availing this opportunity it had to pay a huge moolah.

Disney Star has paid around $3.04 billion for the ICC rights for India for four years. This is substantially more than the $2.02 billion it had paid for eight years for the global rights earlier. Disney-Star's bid was almost double the amount and the highest among all bidders. The deal includes both digital and television rights for men’s and women’s ICC tournaments. On Tuesday, Disney Star also entered into a strategic alliance with Zee Entertainment Enterprises  under which Disney Star will licence ZEE for four years the television broadcasting rights of the International Cricket Council's (ICC) Men's and Under 19 (U-19) global events.

The deal is a first-of-its kind partnership in the Indian media & entertainment space. Through this agreement, Zee will provide a good experience to the fans of the gentlemen’s game and a huge return on investment for its advertisers through its network spread across India and globally. After securing the IPL television broadcast rights for 2023-27 and deciding to only retain digital rights for ICC tournaments for 2024-27, Disney Star is going to have a balanced and robust cricket offering for the audiences across linear & digital platforms.

Earlier, the media conglomerate had retained the TV rights for the cash-rich Twenty20 League IPL for Rs 57.5 crore per match though it had to do away with the digital rights to Viacom18. Disney-Star is also said to have paid around $255 million for the seven-year rights for Cricket Australia, which is a substantial jump compared to what the previous rights holder Sony Pictures Networks India had paid.

In 2020, Disney-Star took the rights for Cricket South Africa till 2024. It is currently airing the Asia Cup. The next big property that will come up for renewal will be the BCCI rights next year for which Disney-Star is the incumbent.

Pointing out his views, an industry observer said, "What I heard is that after Disney-Star, the next highest bid offered was $1.3 billion. The ICC had set a base price of $1.44 billion. Disney-Star should have offered not more than $1.5 billion. The issue is not whether Disney-Star will regain back the reported $3.04 billion but the condition is they have completely misread the market. A tender process works in two different ways. First, it is to figure out what is the worth of the rights to me as a company. This is not a five-minute job."

"This takes months of preparation. There are many levers. For instance, when Star went aggressive on the IPL it was not only about how much the IPL can earn for them. It was also about protecting distribution income across the network. Losing the IPL might have put some of its distribution income under threat. This is another aspect. It is not just about money. It is about the revenue the rights can generate and other strategic value that rights can deliver. Everyone does this calculation and so, the number & strategic value differ," the industry observer added.

"The second part is what is the least I can pay to get the rights? You try to buy for as low as possible. This is irrespective of how much money you think you can earn. That is how you maximize profit & business performance. It is in the second part where there was a massive failure on the part of Disney Star. They could have won the rights for $1.5 billion. Paying so much premium is unheard of in the world of sport. Even if they make the $3.04 billion that they are paying the ICC the bid is a failure. They could have made a profit of $1.5 billion. If they had read the market properly and decided that $1.5 billion was the upper limit, other broadcasters would bid then they would not have bid the reported $3.04 billion," he added further.

Now the ICC will go and sell the rights in other territories like England, Australia, and the US. The expert doubts that a jump in valuation will happen similar to what was seen in India. "Countries like England are going through a difficult economic period. The other markets like New Zealand are small. In the US, many people are interested in cricket. Australia is going FTA," he said.

Speaking on similar lines, another media expert and observer also said that Disney-Star's strategy is futile. "They are the largest media company in the world with the largest balance sheet. A few billion dollars does not worry them as they never justify decisions based on an individual network but as a global company." He mentioned that India is still in an investment phase for them. Cricket on a standalone basis is not viable. However, for a large network like Disney-Star, it is a must-have as it can drive the network as a whole both for TV and OTT. In fact, for digital Disney-Star had to overpay for the ICC rights, the media expert opined and said this has steeply pushed the value of digital cricket rights. On the ad sales front, Disney-Star could try to monopolise ad sales by offering IPL and other cricket properties only to those advertisers who place ads on the whole network for the year. "That is partly how paying a premium could make economic sense," he added.

The media expert noted that Sony & Zee, which are in the middle of a merger, have to be financially prudent. "They have to focus on cost efficiencies. It is also about their ability to monetise the content. Maybe their ability to monetise was relatively limited and so the ability to pay might also have been limited." For the record, Sony renewed the rights for England cricket this year. It also has the rights for Sri Lanka cricket.

As far as Viacom 18 is concerned, the media expert noted that they probably did not see a lot of value in the ICC rights. "Unlike the IPL, in ICC tournaments, there are too many non-India matches in the package. Almost 80 percent of people only watch India play." He expects Viacom18 to put up a fight for the BCCI rights next year. He also conceded that Star perhaps viewed Viacom as a major threat to the ICC rights given the competitive auction that had taken place for the IPL.

For the record, the big properties under the new ICC deal are:

* 2024 T20 World Cup in the US, Caribbean.

* 2025 Champions Trophy in Pakistan.

* 2026 T20 World Cup in India.

* 2027 50-over World Cup in South Africa.

D&P Advisory managing partner N.P. Santosh said that having cricket content is important for a large network. "Maybe on a standalone basis Disney-Star will not make money from these cricket acquisitions but on a network, cricket will drive value. Cricket can make the GEC business, which is already profitable, a little stronger. Sports is a loss leader. Also if you look at it beyond ICC, IPL and BCCI rights there is limited quality cricket of value. The value is significantly smaller when one talks of the fourth biggest property. The next big thing of value after these three is Cricket Australia which Disney-Star went after aggressively." He is sure that India playing a five-test series in Australia in 2024-2025 will prove to be a big draw. After Cricket Australia comes England cricket rights (with Sony) and Cricket South Africa (with Disney-Star). He added that IPL rights went for a 15-20 per cent premium over what he had expected.

For the record, a few of the less expensive cricket properties are with OTT platforms. For instance, Prime Video has the rights to New Zealand Cricket. FanCode has the rights for West Indies cricket.