BCCI media rights: STAR India wins the toss in cricket sweepstakes

Will acquiring the Board of Control for Cricket in India’s (BCCI’s) rights for bilateral international cricket matches in India be the winner’s curse for STAR India?

Or will the acquisition reinforce STAR India’s top position in cricket telecasting by increasing the gap with its traditional rival Sony and keeping Mukesh Ambani’s Reliance Jio away for a second time from winning coveted cricket rights (the first time was the Indian Premier League, or IPL), which not only drive customers but also bring in huge advertising revenue as well as subscriptions.

The Ambanis, who have built a media empire, recently took a majority stake in Viacom 18, the company that runs a bouquet of channels led by Colors, and is fighting a headlong battle for viewership in the general entertainment space with STAR India. 

What Viacom does not have is a sport channel, which it has avoided because of the high cost of acquiring sport properties. 

Winning the rights would have given the Ambanis a big boost, say analysts, in increasing data usage for the 160 million Jio customers, who are looking for compelling content, and cricket is a no brainer. It could have also given Viacom 18 an opportunity to fill a gap for a cricket property. Jio is launching fibre-to-home service, which will be driven by content and TV services, taking on Rupert Murdoch’s DTH business in Tata-Sky.

But STAR India has to pay a stiff bill not only for the BCCI rights but also grabbing the rights of the IPL, also for five years, and that is Rs 44.956 billion (BCCI and IPL) every year, more than double the advertising revenue that flows to cricket currently. 

And while it has bid very high to win against all odds, its challenge now is to make money. The enormity of the task can be seen in the fact that currently advertising revenue for cricket on TV is around Rs 20 billion, of which the IPL generates more than Rs 13 billion. Digital advertising last year generated only Rs 2 billion, primarily from the IPL to STAR’s Hotstar, and, despite all the promise, has a long way to go. 

So the money-making equation has to change dramatically. STAR sources say they will not be able to break even on day one, but the properties are attractive. Some say it has overbid for both the properties and it might not be able to break even at all and has overestimated the revenue-generating potential for digital. They say that unlike in other countries where sport properties are sold high, India does not have the potential for subscription revenue to go up for a long time, so that one can reduce dependence on only advertising.

If the current estimates are anything to go by, STAR has roped in 11 key sponsors for the upcoming IPL, and experts say that it would be able to get advertising revenue of Rs 18-20 billion both for digital as well as TV (but it has to pay Rs 32.69 billion for the media rights). Even assuming it makes another Rs 5 billion from channel subscription, its revenue, most experts say, will fall far short of its cost of acquiring the property at least for this year (of some of the international rights for the IPL will also give them money). 

Added to that will be its challenge to make money after paying a bill of Rs 12.26 billion every year for the BCCI rights. With the IPL taking most of the moolah, there was only Rs 7 billion, which has been garnered for all other international cricket matches, which include ICC (International Cricket Council) matches, and the rights which Sony has for the cricket India plays in England and Australia especially.

But STAR is banking on a massive increase in viewership as well as a major thrust on digital. This, it believes, will help it in increasing ad rates. 

STAR says, for instance, in the case of the IPL it is looking at increasing the number of viewers (both TV and digital) by 40 per cent from 411 million in the last IPL to 580 million this year. 

It also is looking at increasing the usage from 260 billion minutes to 360 billion minutes. With two iconic properties STAR India will dominate cricket viewing with 78-88 matches of international cricket every year for the next five years and that does not include its broadcasting rights to the ICC World Cup, Asia Cup, just to name a few. In 2018-19 itself it will have more than 65 per cent of the international cricket days under its belt. 

Experts say if STAR is on track the IPL and BCCI rights could take away about 8 per cent of the TV and digital advertising spends of over Rs 280 billion in 2018. The share could go up to 20 per cent in five years. Currently Hindi channels constitute 27 per cent of the advertising revenue share.