The loss of the media rights of the high profiled Indian Premier League (IPL) will surely be a huge blow to the profitability of Sony Pictures Network India (SPN) as the company was hugely dependent on IPL for its profits.
The broadcaster in the 10th season of IPL earlier this year, is known to have earned over Rs 1,300 crore, while the previous season raked in Rs 1,100 crore of advertising money.
SPN had paid around Rs 8,200 crore in 2008 for the 10 year media rights of IPL, and the network's India head, N.P. Singh, has consistently maintained that it is the most profitable property of the network in India.
While the average rate for a 10 second ad spot on IPL has been in the region of Rs 5-Rs 6 lakh, SPN in the last few matches of the tournament sold its inventory in the region of Rs 25 lakh for a 10-second spot.
The ad inventory in an IPL match is around 2,300 seconds, and Sony typically managed to pre-sell over 30 per cent of its inventory. The remaining inventory was sold at huge premiums.
With television viewership and reach of IPL going up steadily year-on-year, marketers didn't bat an eyelid when it came to paying huge premiums of IPL, at a time when interest for TV advertising was showing initial signs of a dip. The IPL, in the last 10 years has definitely established its position as a risk-free media property.
However, the question to be asked is whether it will continue to remain a risk-free property with Star India grabbing the media rights for a mind-boggling Rs 16,348 crore, more than double of what Sony had paid for 10 year media rights.
Star India has to make profits in the region of 20 per cent year-on-year to make IPL a profitable property. Star India would have to spend in the region of Rs 55 crore per match, which would mean that it would have to double its ad rates.
Though the loss of the IPL rights will surely be a setback for Sony Pictures Network, it surely isn't end of game. Star India's rights of BCCI matches is ending next year, and Sony for sure will leave no stone unturned to clinch it from Star. The world of cricket is going to all about crazy investments, with every broadcaster worth its penny trying to get a share of the pie. That's not all.
The battle for cricket rights will not be restricted to broadcasters alone. This year already saw digital media companies such as Facebook jumping into the fray and it won't be too long before Netflix and Amazon Prime vying for the same space. If they spend Rs 1-Rs 2 crore per episode on their 'original' shows, spending a fortune on cricket rights will certainly be part of their strategy.