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Star TV has so far forked out over $2.9 billion (Rs 17,800 crore) in buying cricket broadcasting rights, which has made it the undisputed leader in the segment. Now, it wants to go one step forward by grabbing sponsorship rights of cricket tournaments. The reason is simple but elegant: it wants to position the Star brand in such a way that it becomes synonymous with cricket in India. Last week, Star TV just did that when it won the title sponsorship rights for all the 13 international cricket matches to be held in India between October 2013 and March 2014 by agreeing to pay Rs 2 crore a match. It was a steal; Star TV was the only bidder and paid 39 per cent lower than what Bharti Airtel had forked out to win the rights last year. It will be the sponsor as well as the broadcaster of these matches.
It's, of course, the second time that Star has decided to tread beyond broadcasting. Last year, it paid a hefty Rs 100 crore for three years to become an associate sponsor of the popular Indian Premier League (IPL), gaining a backdoor entry into the only major cricket property whose broadcasting rights are with a rival: Sony. Explaining the strategy behind the dalliance with title sponsorship, Sanjay Gupta, chief operating officer of Star TV India, says: "We are betting big on sports, of which cricket is the most dominant content. There is a big potential to expand its share of total viewership. We want to identify Star closely with cricket. That is why, apart from broadcasting rights, we are now getting into sponsorship of the game."
Star TV is the biggest cricket broadcaster in India-the hub of world cricket. Its nearest rival, Sony, has spent $1.6 billion to acquire broadcast rights, but has only one property in its kitty: IPL till 2017. Star TV says it has over 40 per cent share of all the key cricket matches and tournaments which are held in the country and also of India-centric matches held abroad. It has at an average 70-100 days of India-centric cricket in a year. The number goes up to 137 days if international cricket in which India is not taking part is included; however, the viewership of such matches is limited to 4 to 5 per cent of the total viewership. Sony, with IPL, has less than 60 days of cricket.
Past losses
So why is Star TV putting so much money into the game? After all, many critics say that the spot-fixing scandal that broke out during last year's edition of IPL has had an adverse impact on cricket viewership, which was evident in the last few matches of the tournament. Many broadcasters have burnt their fingers in cricket. Neo Sports, for instance, was forced to give up the broadcasting rights for international matches in India after it had made huge losses, according to analysts. According to ICICI Securities, Zee reported a negative Ebitda (earnings before interest, tax, depreciation and amortization) of Rs 87 crore in 2012-13 from sports. Also, with the broadcasters totally at the mercy of the Board for Control of Cricket in India for content (it even forced Sony to renegotiate the IPL deal upwards after its success) it is not a very secure business to be in. Worse, analysts watching Star TV say the huge investment it has made in cricket will impact its margins, at least for the next few years.
But the risks come with immense potential for growth for those who have the cash to stay put. To begin with, despite the criticism and fears, cricket constitutes over 10 per cent of the annual TV advertising pie (currently estimated at around Rs 14,000 crore), or Rs 1,400 crore, and in 2011, when IPL and the World Cup were held, it raked in over Rs 2,000 crore in revenues. Also unlike general entertainment channels (which draw 60 per cent of their revenues from advertising), subscription constitutes for over 60 per cent of a sports channel's revenue. So, more viewers mean more revenue through subscription.
Yet the key problem, according to Gupta, is that that sports channels have only a 4 per cent market share of the total broadcasting viewership pie, and that is very low compared to the Hindi and regional entertainment channels which together constitute over 50 per cent of the viewership. (In developed countries, sports account for 15 to 20 per cent of the market.) This leaves a huge upside for growth. Within sports, cricket forms 70 per cent of the total viewership. So it takes no rocket science to understand where one has to put one's money.
One reason for the low viewership of sports programmes is that the commentary has so far been almost exclusively in English, which has limited appeal. After all, only 2 per cent of the viewers see English programming. Therefore, one way to grow the market is to go regional. Says Gupta: "We are not trying to break this by introducing commentary in Hindi which has huge reach in markets like Uttar Pradesh, Madhya Pradesh, Punjab and Haryana, and broadens the viewership reach." He says that in the next stage, Star TV will also try out commentary in other languages as well; in fact, it has already made a beginning in that direction by offering Bengali commentary for football tournaments.
Cost issues
The other restrictive factor has been distribution: sports channels are included only in the premium packs, which limits their viewership. There are many consumers who want these channels but cannot afford to pay for them. Multi-system operators, the cable aggregators, say the viewership of sports channels is limited primarily because they cost more: the rates range from Rs 45 a month to Rs 85, which is nearly the same as an English movie or entertainment channel. This is way more that the Rs 35 one has to pay for a Hindi movie channel. Gupta, on his part, says that pricing is not such a big issue. "Viewership of sports will go up if it is put on a basic pack. The increase in price would be marginal, say from Rs 200 to Rs 220, which is pretty affordable, and it will attract more viewers."
What of course will push viewership is the digitisation of cable signal. The government has initiated a programme to digitise the whole country in four phases by December 2014. For one, cricket is compelling content, for which consumers are willing to pay higher. The multi-system operators will have to push cricket if they want average revenue per user to go up. In the analog mode, the limitation of channels (only 30) made sports channels difficult; they were available sporadically when some important cricket matches were being held. The change is already happening. Gupta says that about 70 per cent of all DTH households have a sports channel and a similar trend should happen as more and more consumers shift from analog to digital cable across the country.
Star TV is also moving on to the digital platform to increase its subscription revenues for cricket were subscribers have to pay for key tournaments. It is doing so through starsports.com which has already got over 12 million viewers. Gupta says that out of these, about 200,000 are "paying" viewers who fork out about Rs 100 to see a series like the Ashes - a model which was launched only in July. Analysts say that if this picks up, it could get Star TV additional revenue of Rs 60-100 crore a year.
Will putting in so much money in cricket have a rub-off effect on the Star bouquet as a whole? Gupta says that sports, especially cricket, complement general entertainment, because they address different kinds of audiences for the advertisers. "The Hindi general entertainment segment is targeted at women and the old. Sports are targeted at men and the young audiences. It also is the fastest way to reach them," says Gupta. That's not all. The cricket audience could also be used for sampling other forms of sports for which broadcasters are trying to create a market. Despite the risks involved, Star TV is gambling on cricket to take the next big step to expand the market and get a larger share of the total advertising pie. It could well be a game changer if it succeeds.
