Mumbai: India is on the cusp of a revolution in the sports business. A recently released report compiled by Anand Rathi Advisors (ARAL) confirms what sports pundits have been claiming for long – that India’s time as a sporting superpower has come.
According to ARAL, the sports industry is estimated to reach $100 billion by 2027; up 4x from $27 billion in 2020.
The report hypothesizes that the industry will be driven by India’s gigantic youth population (400 million people, larger than the population of the US) and rapidly improving economic conditions. Historically what has been seen is that as basic needs are met, the populace leans towards consumption that supports a healthier lifestyle and entertainment.
"We believe that the entire sports media market will grow at an unprecedented rate over the next few years," said CA Atul Thakkar.
Thakkar joined ARAL in 2013. He joined the financial services firm in 2007 and sharpened his leadership skills at the organisation for over 15 years. Prior to this, he began his career with Kagrana & Associates Chartered Accountants.
In conversation with Indiantelevision.com, Anand Rathi Advisors director - investment banking CA Atul Thakkar shared his views on the sports media market.
On the factors that will propel the sport media market in India
Viewership and engagement will drive the sports media market. The unique ability of sports to draw eyeballs from a wide set of captive audience over an extended period of time is what compels brands/advertisers to spend money on sports. With multiple sports events gaining traction with the youth (cricket, kabaddi, F1, UFC etc.), unveiling of new sporting leagues and access to sports over multiple platforms – overall viewership of sport will grow. We believe that the entire sports media market will grow at an unprecedented rate over the next few years.
On the IPL rights being split between two broadcasters
Given the unique position that digital has come to occupy in today’s times, from BCCI’s (Board of Control for Cricket in India) perspective it makes commercial sense to split the rights between television and digital. It is a function of changing consumption patterns that has driven this decision. Media consumption is shifting towards digital with consumers spending +50 per cent time on digital as compared to television and this will increase manifold over time. We would not be surprised if the next media rights auction sees digital rights base prices exceed that of television.
On whether Disney Star and Viacom18 will make money
There is a sound commercial viability basis for the money spent on the rights. India is a large market, we have 400 million people in the age group of 15-45, which is larger than the population of the US, presenting an opportunity to grow sports viewership exponentially provided it is packaged as a mix of entertainment and sporting prowess – which the IPL is. Viewership has further potential to grow as the IPL expands into new geographies globally. We expect that the first two years will remain the investment period dedicated towards increasing the viewer base while the returns start coming in post that.
On the IPL ratings falling on TV
Covid-19 was a setback for IPL, in which the matches were postponed, the venues were changed. This created a break in the excitement of the game. However, the latest IPL season with two new teams was a success. The reason for falling television viewership is that people are shifting to OTT platforms and prefer to watch the game online. IPL is a valuable property and the only major sporting event in the country, we expect viewership to continue to rise with a change in the OTT and television mix.
On the rights value growth potential for other cricket properties like ICC
Cricket’s base in India and the South Asia region in general, combined with BCCI’s monetary heft, made IPL a massive success. The T20 format of the IPL is short, packed with action and easy to consume. We do not see any other cricket property having the wherewithal or the market to create a league of similar scale and fan following as the IPL.
On whether other sports are gaining traction in terms of viewership and rights value
Cricket has clearly dominated India in terms of viewership i.e. nine million, however, other sports leagues like PKL are growing, the viewer share of PKL has grown from 31 per cent to 39 per cent in five years. ISL again, has gained global recognition and has become the fifth largest football league in terms of viewership. The properties other than IPL, though currently smaller, have the potential to grow with the right investments.
On the role that digital is playing in disrupting and growing rights value
India will have 900 million internet users in the next five years, underscoring the potential of digital rights. While TV was the main source of entertainment in Indian middle-class homes, the past few years have seen a rapid pivot toward online streaming due to affordable internet and smart devices.
The pandemic accelerated the digital media growth in India. For instance, the premium paid for the media rights in the IPL, 1.7x for digital and 1.3x for television, shows the potential that corporates see in digital rights and their willingness to pay for it.
On the progress that local leagues like ISL, PKL are making
ISL and PKL have been the underdogs as compared to the IPL as they do not come with the money power that IPL has. Sports is entertainment, which PKL has managed to deliver with its format while ISL still has to improve its viewer engagement. ISL for one has always been popular with a consistent viewership from a core base. Investments in making the games more engaging – better camera angles capturing the action, for instance, will catapult ISL substantially.
Both leagues have started small and have seen viewership traction with numbers that would be considered a success in most developed nations. The increase in viewership will see sponsorship pick up for these two leagues. They do have a very long way to go as compared to IPL, but without doubt they have been successful.
On the potential impact of inflation in the sports media rights market in the coming five years
Inflation is a transitory economic phenomenon. We do not see it having a significant impact over the next five years.
On advertising and subscription being important
Advertising is the larger chunk of revenues, however the rates itself are determined based on viewership and subscriber base. Subscription revenue provides a base to build on in periods where there aren’t any major events, shows or movies.
On whether the startup funding slowdown will impact the ad market for sports
Start-ups account for a minor portion of Sports Sector advertising. The start-ups that do spend the big bucks - like Dream11, Byju’s and Unacademy - are the leaders in their space and are well funded. A brand aims to reach the largest set of viewers, sports invariably provide this opportunity – with millions of people tuning in for 90 uninterrupted minutes.
In the current context, we expect brands to rationalise spends and skew it towards mega events that draw eyeballs - such as sports. There will continue to be multiple bids for sponsorship and we do not think the slowdown in the funding will have any significant impact on the ad market for sports.
On trends being seen in gaming, e-sports in terms of investments and fan following.
The gaming and esports sector is very differentiated. Each platform has a different strategy which doesn’t lend itself to straight analysis. You will see behemoths in each segment, but the differentiated experience in each platform will allow for them to co-exist and thrive.
On the way forward for India to follow other sports more
Our thoughts on the way to expand sports is to create several commercial leagues – in the US for instance, a country with a population a third of India’s – there are over a 100 functioning leagues. Competitive leagues will make sports a viable career option, ensuring wider participation.
For instance, the IPL has given a platform for talented sportsmen, who although have not made it to the national team, have found a way to make a meaningful career in the sport. Presence of leagues will have a trickle down effect with children wanting and parents willing to allow their wards to play sport competitively, creating demand for related infrastructure, products and services, which enterprising individuals will fill.
The ultimate aim as a society should be to make every individual play sport competitively, there are a host of character traits and health benefits that sports bring that can have significant societal impact which will help the nation in the long term.