Worth the price? Brands will count the cost of bidding for IPL media rights

At base price of Rs 32,890 crore, India's biggest companies will calculate business logic in joining the bidding contest.

The Board of Control for Cricket in India (BCCI) has pegged the base price for the combined Indian Premier League (IPL) media rights at Rs 32,890 crore, nearly double the Rs 16,347 crore that Star Disney had forked out five years ago.

Experts say at these levels there does not seem to be any profit-and-loss logic; instead, it is all about the premium broadcasting companies are ready to pay for market dominance. They expect the final price to be anything between Rs 40,000 crore and Rs 50,000 crore for five years.

Advertising and media buying agencies, however, say that there is no logic used when advertisers buy advertising inventory in IPL (unlike for others where they closely look at cost per rating before taking a call). It is dominated by start-ups backed by VC funding looking for bragging rights or to build the brand for valuation.

Companies can bid for four packages separately or for the entire media rights. Those who have been privy to the rights sale documents say that the reserve price for the 74 matches for linear TV is pegged at Rs 18,130 crore and for digital right at Rs 12,210 crore. The other two smaller rights include those for the rest of the world and digital rights for only 18 matches.

Media ranking

Those in the know say that for the Reliance Viacom-James Murdoch combine winning the rights could become an entry point to re-rank the broadcasting media sweepstakes. The combine is a small player, with a revenue and viewership market share far lower than both Star Disney and the Zee-Sony combine.

Based on FY21 revenues of the four key players (including Sun TV), Star-Disney is at the top with around a 40 per cent share, the Sony-Zee combine follows closely with 37 per cent, and Viacom 18 is far smaller with 12.8 per cent. The story is repeated when one looks at the market share across all channels: Star Disney with around 29.2 per cent is just ahead of Zee-Sony's combined market share of around 27.5 per cent, and Viacom is far lower at 9-10 per cent.

Viacom has been quietly building its sports channel, but it does not have a winner and grabbing IPL could change the game. The combine can pay a hefty price for market share acquisition. This is reflected in the fact that in Star-Disney the broadcasters' network share has seen a sharp rise to 31-32 per cent during the IPL months.  

For Sony-Zee, not making a bid will help create a third strong player in Viacom-Murdoch. There were talks of a tie-up with Amazon Prime and the possibility of bidding as a consortium with Sony. Then later, the buzz was that the Sony-Zee combine will share the cost. Sources say that strategy cannot work as a clause in the bid does not permit consortium bidding.  

K Madhavan, president of Star-Disney, has said his business will not indulge in a bidding war and pay multiple times more. Star-Disney has a lot to lose: in terms of overall market share, clout with media buying houses to determine price, and of course the impact on overall ad revenues.

Ad inventory

Those who have looked closely at Star-Disney’s operations say that with advertising revenues of Rs 4500 crore this year, excluding the cost of producing and programming, the profits made even in the fifth year might not be as attractive.

But will companies be ready to pay a hefty increase in ad rates which is inevitable at the base price fixed by BCCI? Media buying agencies say that to be viable at these rates advertising inventory rates should move up from Rs 15-18 lakh for a ten second slot in this year's IPL to over Rs 30 lakh.

"There is no logical calculation about cost per rating when buying ad inventory in IPL. That is why big companies which buy media, such as Unilever, Marico, Dabur, Hero, stay out of it. At least 90 per cent of the inventory is bought by start-ups who are looking for bragging rights and brand recognition so that they get better valuations," says Sandeep Goyal, managing director of Rediffusion India.

"To make money, broadcasters have to push up prices to Rs 1 crore for a 30-second slot. But companies might be hesitant in the first one or two years, even if they agree to pay eventually,” he says.