A big hitter steps forward

Zee's Subhash Chandra has triggered a fight by outbidding ESPN with help from India's cricketers

Is it a giant sixer from Zee TV that has sent its rivals flying over and out of the stadium? Or, will ESPN-Star Sports come back into the match with a googly as cunning as anything that Anil Kumble might produce from his deadly repertoire?

At stake is four-years of cricket on the small screen "" a four-year contract with the Board of Cricket Control of India to cover all matches in India. On Wednesday when the bids were opened it was Subhash Chandra's Zee TV that was far in front with a bid of $260 million (around Rs 940 crore). ESPN-Star, which had expected to be the biggest spender in the field was $30 million (around Rs 140 crore) behind.

Inevitably, ESPN is shouting foul and asking for a re-match. It quickly went on the offensive alleging that Zee should be disqualified because it doesn't have the necessary two years experience of telecasting international level cricket. That was a pre-condition in the bid.

Says R C Venkateish, managing director, ESPN Star Sports: "Zee clearly does not qualify as it does not have the requisite experience. Ours is the highest qualifying bid". Bunkum says a senior Zee spokesperson. "We have experience in telcasting cricket matches in UK and US from 1995 so this argument is fallacious."

ESPN-Star is also trying other tactics to bowl out Zee. It has offered to match Zee's offer. Alternatively, it has thrown up a new suggestion saying it is willing to offer $300 million (Rs 1,380 crore)if the contract is extended for five years. Zee replies that if the bid is being revised it must also get another chance to make a fresh offer.

Why are both sides so keen to grab the contract? And can they make money with such high bids. Let's look at ESPN-Star. The company earns over 50 per cent of its revenue from cricket and a substantial chunk of it comes from cricket played by the Indian team "" so cricket is the game that keeps it in the small screen match.

ESPN already has a problem. This year it is showing less cricket than before. In the last few years it has had rights for 40 days of cricket in a year which India was playing (these were all away matches as ESPN had satellite rights in countries like the UK, Australia and South Africa, among others). That has fallen to 40 days in the next 18 months.

Admits Venkateish: "Yes there is a drop of over 30 per cent in the number of India matches, but that is not so substantial." But he admits that revenue would obviously grow faster if it gets the BCCI contract.

Industry experts however point out that a 30 per cent drop in the number of days that the Indian team is on the screen could lead to a much bigger drop in advertising revenues.

That's because many of the matches are against weak rivals like Zimbabwe and Bangladesh. And if ESPN isn't showing good Indian matches it could also face a problem with cable operators who will balk at paying high access fees.

But this equation would change dramatically if ESPN grabbed the BCCI rights. It would have 200 days of cricket for the next three years and its stranglehold over the game would be complete. Says Venkateish: "If we get this deal we will have more cricket that we actually ever had or will need to drive distribution."

For ESPN this is obviously a make or break situation and it is desperately looking at other ways out of the jam. One such move is a cricket tour of India to Europe.

Secondly, it is also developing alternative properties and even looking at the possibility of pushing Indian hockey in a big way. It also has other popular sports like Formula 1 racing on the channel.

In contrast for Zee, the rights is a mega gamble and the channel isn't only thinking about winning on the cricket pitch. The channel could use cricket to draw advertisers and viewers back to the channel bouquet.

Firstly, winning the rights could catapult Zee back to the number one spot as India's top channel with a turnover of Rs 1,200 crore. (That's compared to Star with ESPN which is slated to be around Rs 1,700 crore).

The cornucopia of cricket could bring in an extra Rs 500 crore. The channel could leverage that in many ways "" by hiking the bouquet rates, driving up paid subscribers, pushing its DTH platform and ad revenues. What's more, it will establish itself firmly as a player in the cricketing arena with more matches than Sony TV, Ten Sports and almost as many as ESPN.

This new strength can be leveraged to drive up subscription revenues. (industry estimates are that Zee currently has about 5 million paid subscribers). Says a senior Zee executive: "At the moment our subscription rate is growing by 20 per cent to 25 per cent. This could easily go upto 50 per cent because of cricket."

Industry experts also add that the channel will be able to hike subscription rates if it has a Zee Sports channel in the bouquet.

Says a senior executive of a satellite channel who has been closely involved in buying cricket rights: "Zee has been losing out to Star and Sony. This gamble can push it to the top slot. That is how this deal should be looked at. It is strategic."

More importantly, cricket can be used to boost the group's direct-to-home business (DTH). Currently, the company already has over 150,000 subscribers but Zee Group's Jawahar Goel says it is aiming at 1 million by March 2005. Says Goel: "With cricket we can double this target easily."

But putting in big bids is always a risky business and the million dollar question is whether anyone can make money at such high prices. Experts say it's possible but it's easier for companies like Zee and Sony which can use the action on the sports field to boost other operations.

How does this work out? Experts say the channel which wins the BCCI contract could rake in over Rs 2,000 crore on the property. Assuming production costs of about Rs 200 crore to Rs 300 crore this means a cool Rs 500 crore to Rs 600 crore in the bank in four years.

Anyone who gets the rights could make around Rs 250 crore to Rs 300 crore by selling the international, Internet, broadband and mobile rights to the matches.

The big bucks will come from advertising and subscriptions. Industry experts estimate that whoever gets the rights will be able to rake in over Rs 600 crore to Rs 700 crore from advertising (assuming it earns about Rs 2 crore on a test match per day and Rs 10 crore on a one dayer).

Of course, the haul from advertising could be much higher. A few years ago a 10-second slot during a top one-day match was around Rs 1 lakh. That has risen to about Rs 2 lakh today. Says a channel insider: "You can easily assume that the tariffs will go up by at least 50 per cent in the next four years if not double."

Then, there's the cash from terrestrial rights. That depends on the deal made with Doordarshan and how the advertising money is shared. Experts reckon a channel can earn about Rs 300 crore. Of course, you have to subtract about 20 per cent of this for ad agency commissions and service tax.

For Zee there could be amazing additional spinoffs. Industry experts reckon that the channel could earn an additional Rs 700 crore to Rs 800 crore if it can double its paid subscribers from 5 million to 10 million in four years. ESPN is at a slight disadvantage here because it already has 7.5 million subscribers and does not control a bouquet.

There are scores of other ways that the channels can score. And that explains why both sides are not ready to budge. For a cricket crazy nation it is one TV property which could virtually change the fortunes of a TV channel. That's what Zee wants to do but ESPN is refusing to move from the wicket.