Can Broadcasters Chase the Rs. 80000cr Score?

BY Ashee Sharma

Following the E-auction held by the BCCI on August 31, Viacom18 secured the exclusive media rights for the BCCI International and Domestic matches for September 2023-March 2028. The network won both the Indian sub-continent and global television and digital rights for the next five years for a cumulative figure of Rs. 5,963cr.

The number is significant, because with this deal the total media rights valuation for all major cricketing properties (men and women’s) including the IPL at Rs. 48, 390cr, WPL at Rs. 951cr, ICC at Rs. 24,800cr, and now BCCI Bilateral Cricket at Rs. 5963cr has soared up to Rs. 80,000cr, which is comparable to the total Indian AdEx for 2022 at Rs. 89803cr (Pitch Madison Advertising Report 2023). Unsurprisingly, Sports dominated TV AdEx, contributing around 23% to it last year.

There were also other noteworthy features of the Bilaterals deal. The last cycle (2018-2023) saw Disney Star taking away the Television and Digital rights for Rs. 6138cr at Rs. 60.18cr for 102 matches. While the total rights value has decreased for the current cycle, with the number of matches down to 88, Viacom 18 will be shelling out a nearly 13% higher amount of Rs. 67.8cr per match. While announcing the winner of the e-auction, BCCI secretary Jay Shah said in a statement, “Today’s e-auction has propelled BCCI into the upper echelons of per-match media rights valuation, marking a monumental stride in our journey.”

The bilateral auction also marked the first time when the Board charged more from Digital platforms than TV, by setting a higher base price for the former. According to a media report, the e-auction tender released by the BCCI had the collective base price (TV + Digital) set to Rs. 45cr per match. At the same time, the base price for Package A including TV rights for the Indian subcontinent was Rs. 20cr per match and for Package B encompassing global digital rights and the rest of the world TV rights was Rs 25cr.

Having witnessed a staggering 196 per cent appreciation in rights value after splitting the TV and digital rights, by doing away with composite bids, for the first time in the 2023-27 IPL cycle, while the BCCI’s April announcement about the unbundling of bilateral cricket rights may have been anticipated, such an explicit endorsement of Digital came earlier than expected. Apart from stirring the never-ending TV vs. Digital debate once again, it raised questions around the viability of cricket media rights valuations for broadcasters and waning interest in formats other than T20.

APPRECIATED OR INFLATED
The unbundling of TV and Digital in a high-octane scenario where broadcasters are pulling out all stops to ready themselves for the streaming-first future, may surely bring windfall gains to the governing bodies and cricket at large, but can advertising keep pace? Thankfully, as part of larger and long-drawn strategies for both broadcasters and advertisers, these investments are not merely about cost recovery.

Karan Taurani of Elara Capital says that cricket content comes with a massive reach and hence a massive premium that must be paid even if one does not achieve the desired numbers or profitability. Sharing a keen observation, he adds, “Despite whatever they’re doing in terms of regionals, originals, or movies and web series, we have clearly seen that many broadcaster-based OTT platforms haven’t scaled up their revenue base as much as cricket-based OTT platforms have. We saw how Disney + Hotstar became the AVoD market leader, and today Jio Cinema is going that way; all because of IPL. Cricket is all about scale. It’s about enhancing your subscriber base and cross-selling other content to those subscribers. And then eventually, waiting for the right time when you can turn profitable. But cricket is a must have for TV and digital platforms today.”

Jehil Thakkar, Partner, Deloitte India says, “Large sports properties around the world are highly valued for a reason. One, they act as a magnet for viewers and subscribers. Second, they are one of the only avenues for appointment viewing. A lot of entertainment options are moving to streaming where consumers can watch at a time of their choice, but with sports the value of the immediacy of the entertainment is very high. So, as you are trying to build properties, you’re trying to build channels, you’re trying to build streaming platforms. Sports properties act as anchors for the entire business. So, it’s not prudent to think of them as standalone investments. One has to look at the larger, more strategic perspective.”

Further, Thakkar is of the opinion that whether or not the growth of Digital causes the value of these rights to escalate significantly in future, sports properties will be more valuable for broadcasters going ahead. “We are at the beginning of a multi-decade journey where Indian consumers will continue to grow and become more and more prosperous. Our consumer market is just getting started. Therefore, the need for advertising is going to stay robust. We don’t even have modern retail as one of our largest channels so far. Even the subscriber base for streaming services is still very low. As it grows, some of that value will translate into value for rights.”

Looking at this growth in terms of AdEx, Anand Chakravarthy, Chief Growth Officer, Omnicom Media Group says, “While AdEx in India has grown significantly, as a percentage of our GDP (which is growing fast), we continue to be under indexed, even when compared to countries like Brazil. $14bn AdEx translates to less than 0.2% of our $3.5 trillion GDP. In the US it is 1.1-1.2%; Britain is 1.1. In most countries this percentage is used as a yardstick to assess whether there is room for growth in ad spends or not. Clearly, there’s significant headroom for growth in India.”

Before any inferences are drawn, he adds that as all that money comes into the market, not all of it is going towards cricket, not even if there were to be new formats and more round-the-year cricket happening. “The fact is that today there are a lot of other entertainment options for people. So, the interest in cricket is not going to sustain throughout the year, at the same level. This in turn does indicate a potential threshold of how much of ad monies will be invested in cricket.”

Santosh N, Managing Partner, D and P Advisory points out that although the last couple of years have been a dampener for AdEx from a startup point of view, the total AdEx for properties like IPL has grown multiple times in the last seven years, from Rs. 1,000cr in 2017 to Rs. 10,000cr in 2023. “The advertising budgets for companies depend on a whole host of factors like general economic situation, industry specific factors, and funding situation. The rise we have seen in the media rights pricing over the last few years has been influenced by demographic factors, digitisation, internet penetration, people’s love and preference for 3-hour matches as against 7-hour matches, and quality of cricket. With India’s AdEx to GDP ratio still significantly lower than some of the developed nations, there is a significant room for growth,” he says.

ODIs AND TEST CRICKET - NOT AS ATTRACTIVE?
Call it the overall market sentiment, the funding winter, or the growing attractiveness of franchise-based leagues over bilateral cricket that had the BCCI playing the overall match on the backfoot this time. The Board had set the base price per match for the current cycle at 25% lower than Disney Star’s outgo for the previous one. It had however reserved the right to cancel the auction should the threshold of Rs 60 crore per match not be met. Viacom 18’s winning bid also came at a modest 13% as compared to the 40% premium paid by Disney earlier. Tellingly, as per a Bloomberg report, the BCCI was also “trying to lure” tech giants Amazon.com Inc. and Alphabet Inc. to participate in the bilateral rights auction “amid waning interest from firms who had recently competed fiercely for the wildly successful Indian Premier League.”

Anand Chakravarthy thinks it would be unfair to say that the interest in all other formats except T20 is waning. “ODIs continue to get decent ratings, depending on who India is playing. Even in other cricket playing countries, ODIs continue to do well and so do Test matches. Certainly, with the significant increase in Cricket days in a year there is waning of interest in the sport. Too much of anything will always result in fatigue. And this has happened in all kinds of sports and events because people’s attention spans are reducing. The focus is on shorter formats. From a ratings PoV, test cricket no longer enjoys the ratings it had. ODIs have marginally decreased, while T20 continues to enjoy relatively higher ratings.”

According to Elara Capital’s Karan Taurani, while the delta that can be created through bilateral series may not be as high as World Cup Tournaments or IPL, this does not necessarily signify waning interest in bilaterals. The low premiums are better explained in terms of prevailing market conditions. “The market conditions at the time of the IPL auction were very different. There were a lot of new age companies, and a lot of advertisers on TV and digital. Over the last one year, we have seen pressure on most new-age verticals which are moving towards profitability. We have seen pressure on the gaming vertical which is a large advertiser for cricket, as a whole. Traditional verticals like telecom and FMCG too were under inflationary pressure.”

Taking a different stance, Senior Broadcast Media Professional Dhirendra Yashwant says, “While Viacom 18 (Jio Cinema and Sports 18) is on an expansion spree, other bidders were being cautious. We have now seen that the IPL franchise model works wonders for brands when it comes to reaching out to their TG and the ROIs, whereas a bilateral match between two cricketing nations is comparatively a less attractive proposition. One-day cricket becomes too long for a consumer to invest their time and emotions in, mainly because recently we have seen quite a few big players dropping out of bilateral series to keep themselves fit for multinational tournaments like World Cup or IPL.”

“The interest for bilateral cricket tournaments is waning (as was seen in India’s West Indies tour) except for very good quality cricket (as was seen in the Ashes). Cricket is following football where leagues have become more important. So, the broadcasters’ lack of interest in bidding for these rights was expected,” adds Santosh N.

ALL EYES ON DIGITAL
At Rs 23,758cr, the current IPL cycle (2023-2027) saw Viacom 18 paying a higher price and higher premium for Digital rights than Disney Star’s Rs 23,575cr winning bid for TV. The latter’s sub-licensing of the TV rights for ICC men’s and Under-19 events in the India market to Zee, while retaining the Digital rights was seen as further validation of the significance of Digital for broadcasters. Disney Star, had in August last year, bagged the TV and digital rights for all of ICC men’s and women’s events in a $3 Bn deal for four years (2024 to 2027) for the India market. The prestigious rights are considered as cricket’s second-most lucrative, behind only the IPL. Keeping up with the trend, the Digital rights for Bilateral cricket, valued at Rs. 3,101cr outpaced TV at Rs. 2,862cr, once again, though at a slightly lower premium this time, due to the higher bid price.

Taurani attributes the trend to Digital being a high-growth medium, as compared to TV where the growth has nearly plateaued. “TV may not see growth of more than 7-8% on a CAGR basis in terms of ad revenues whereas the number for Digital could be 20 plus. And that’s why the higher prices. It’s a mega trend that’s here to stay for the next 5-10 years.” Another factor he says could be the highly fragmented market which leads to more competition in Digital as opposed to the consolidated TV market which keeps premiums under check. “Digital premiums, rather digital cost per match basis, will therefore continue to be higher versus TV because clearly growth rates there are far more superior.”

D and P Advisory’s Santosh N concurs, “These prices are largely driven by demand and supply factors. The number of bidders for digital rights is far higher than linear TV as not just the media companies, but even tech, e-comm, social media, and telecom companies are looking at Digital rights. The shift to Digital for consumption of content is real and this trend is expected to stay.”

Not just in valuation, but even in terms of media spends, sports on Digital has been growing quite rapidly. As per the GroupM ESP India Sports Sponsorship Report 2023, sports media spends on Digital have grown at 112% from Rs. 965cr in 2021 to Rs. 2045cr in 2022, with cricket holding 94% share. The corresponding numbers for TV are Rs. Rs. 5051cr in 2021 and 5506cr in 2022 - an increase of 9%. Further, TAM estimates also indicated a 20 percent growth in CTV ad spots during IPL 2023.

Nikhil Kumar, VP, India & SEA, mediasmart, Affle observes that while the unbundling of TV and digital rights provides sports properties with multiple monetisation channels, this does not take away from TV. “We’ve moved on from the era of sports events being only broadcast via a single medium. Now it is consumed over television via linear feed and television via digital feed. It is also consumed on multiple screens like online websites, mobile web. Consumption patterns have moved across multiple screens and it speaks of the volume it presents for advertisers across multiple platforms.”

Kumar, however, adds that as digital platforms continue to innovate and optimise ad targeting, the growth in ad revenues will continue to contribute increasingly to higher valuation of sports properties. “CTV is small, but packs a punch. It’s growing at a steady pace and with Jio entering the fray of IPL streaming, whatever estimates industry pundits had for CTV growth have accelerated and previous estimates have changed. As CTV’s influence continues to grow and digital innovation progresses, the advertising arena is poised for further transformation and adaptation.”

A tad sceptical of these estimates, Anand Chakravarthy points out that the CTV universe in India is just about 22-25 million affluent households in the top 15-18 cities, and therefore investing on CTV, whether on cricket or otherwise, depends on the brand, its TG and markets. “If it’s a premium audience then linear TV would mean a lot of spillover, and therefore it makes sense to go with CTV on a high-value property like cricket. However, suggesting that on cricket, CTV will overtake TV in terms of advertiser interest is just too premature. India is a large country with 1.4 billion people spread across a very large area, and different levels of prosperity. There are vastly different types of advertisers operating in India – some focused on national markets, some on regional, and others that are focused only on top metros and each with their own core TG. The role of TV vs. Digital in their media plans is a function of this. CTV is not a mass reach platform and therefore not relevant for all advertisers and so it currently accounts for a limited percentage of ad spends, for cricket or otherwise. When CTV reaches a 100 mn+ households, is when it can potentially start making a more serious dent in linear TV spends.”

If IPL is to be taken as an indicator of trends across formats of cricket, the findings of Axis My India’s IPL Sentiment Index survey are relevant. The survey was carried out on a sample size of 10,206 people across 35 states and UTs between 6 April and 30 April 2023. 64% belonged to rural India, while 36% belonged to urban counterparts. The findings showed that 55% people prefer to watch matches on their linear television sets, this number was 61% in urban markets. 45% preferred to watch on mobile (Jio Cinema) with 48% in rural areas. Mobile (Jio Cinema) is the preferred mode of watching for 18-25YO, (64%), while linear Television sets are favoured by 36-50YO, (66%). Connected TV was significant at 4%. When compared to 2022, only mobile & connected TV viewers increased significantly.

Commenting further, Girish Upadhyay, Chief Marketing Officer, Axis My India states, “Media consumption habits are not uniform across demographics & geography, with variations emerging among different age and urban/rural groups. It is noteworthy that younger age groups are showing a greater appetite for consumption on digital.”

Tags : #advertising #ADEX #cricket #BCCI #e-auction #cricketmediarights #cricketbroadcast #cricketinvestment