Star India's aggressive bid of Rs 16,347.50 crore for the five-year broadcast and digital rights of the Indian Premier League (IPL) took the industry by surprise. But, what is clear is that having sports rights - especially cricket rights - is crucial for broadcasting networks.
"Premium sports drive premium subscription. It not just helps pump up the overall ratings of a broadcaster, but also gives bargaining power to negotiate with multi-service operators," says Vinit Karnik, Business Head (Entertainment, Sports & Live Events), GroupM. Sports is the key revenue earner for broadcasters after dramas. Among the top 20 television events in 2016, 17 were sporting events, dominated by cricket.
"Having cricket in the portfolio immensely helps generate higher top lines," says Harish Thawani, Founder, Nimbus Communications (which owns Neo Sports). The IPL hugely contributed to the profits of Sony (the previous season of IPL earned Sony revenue of Rs 1,300 crore), and the media conglomerate launched a bunch of sports channels on the back of the IPL. It acquired Ten Sports from Zee Entertainment last year and has also joined hands with ESPN.
With BCCI's India cricket rights coming up, Sony, which lost out to Star for the IPL rights despite bidding Rs 11,050 crore, will definitely leave no stone unturned. "I expect Star to do a defensive bid, so that they will get Sony to bid aggressively," observes Thawani of Nimbus. Star is known to be losing Rs 200 crore year-on-year on India cricket, and Thawani believes that it may be happy to let go of the India cricket rights, since it has IPL in its kitty now. However, even in IPL, the broadcaster has to make 20 per cent profits year-on-year for the next five years to stay profitable. That is revenues of at least Rs 55 crore per match.
Hitesh Gossain, Founder of sponsorship marketplace Onspon, sees advertisers preferring networks that offer sports, especially cricket. "It may be over-valued, but it's a safe investment as far as the advertiser is concerned." When it comes to cricket, advertisers, Gossain says, don't just want to spend on television but also on digital platforms that also offer a high level of consumer stickiness. A large component of the traffic to Hotstar is because of cricket and other sports. This explains why Facebook (Rs 3,900 crore) Airtel (Rs 3,280 crore) and Jio (Rs 3,090 crore) bid so aggressively for the digital rights of IPL. "They will want to control the pipe as well as the content as they can charge consumers for data as well as subscription," says Karnik of Group M.
Yes, the likes of Zee Enter-tainment, Viacom and Sun are doing reasonably well without sports in their portfolio. But industry expects them to be contenders for cricketing rights five years from now. Reliance bid Rs 3,090 crore for IPL digital rights because their next round of growth could come from customers they will acquire on the back of content. With the company already having a large enough stake in Viacom, there is no reason why they won't bid for both broadcast and digital rights of IPL in 2022. "Zee, most probably, has a three-year non-compete contract with Sony; therefore, I am quite sure that five years later, they will be in the race too," speculates Thawani of Nimbus.