AS A STAR HITS A SIX...
IMPACT decodes some talking points thrown up by Star India’s spectacular win of the global media rights for the Indian Premier League (IPL) for the next five years TEAM IMPACT “Our strategy was a very high risk one where we designed our bid to lose each of the individual categories. So, we were very concerned, we knew that it was something where we could either get all the rights or lose it all,” said Uday Shankar, Chairman and CEO of Star India, talking to exchange4media after picking up the media rights for the Indian Premier League (IPL) matches. The statement clearly reflects the ‘win all or lose all’ strategy adopted by Star India in its pursuit of the IPL, arguably the biggest property on Indian Television. Here, we analyse this strategy and some other scenarios that have emerged following the IPL auction on September 4, 2017. A quick look at the Excel sheet tweeted by the Board of Control for Cricket in India (BCCI) about the ‘IPL Media Rights -2018 to 2022 - Bids Summary’, shows the highest bids in each category and vertical highlighted in yellow. Only one of the yellow patches belong to a bid by Star India, which had a bidding strategy to lose each of the individual categories and bet big on the consolidated global bid. Star could have walked away empty-handed if its global bid of Rs 16,347 crore ($2.55 billion), had ended up being lower than the sum of the highest individual bids across different categories, and towards this end, its global bid was double the sum of its individual bids in different categories. This was a deliberate strategy to underplay its numbers and make sure that none of its bids were the highest, to end up as a potential threat to its own consolidated global bid. While Star couldn’t control its competitors’ bids, it ensured that its quoted bids didn’t in any way compete with its global bid or add up to a total that could upset the applecart. Though a risky proposition, Star probably dealt all its cards right. Post the auction, IPL is the third costliest sports league in the world, behind NFL and EPL. 2. THE SIN OF SHUNNING A CONSORTIUM The only other contender who could have put up a global bid at the IPL auction was Sony Pictures Networks India (SPN) – the incumbent IPL television rights holder. Instead, SPN chose to put its eggs in one basket and concentrate its might on procuring the Television rights with a bid of Rs 11,050 crore. While it could be argued that SonyLiv – SPN’s digital platform – does not have the numbers that Hotstar does, media reports before the IPL auctions hinted that SPN was looking at partners in the Digital sphere for its IPL bid. In the end, this didn’t materialize and though the bids put up by the Digital players were astronomical, they too couldn’t get the prized wicket. Facebook, Airtel, Reliance Jio and Times Internet bid Rs 3,900 crore, Rs 3,280 crore, Rs 3,075.72 crore and Rs 1787.50 respectively while Star India Digital’s bid was actually the lowest at Rs 1,443 crore. The question is, when the aggressive Star India was expected to come to the auction with all guns blazing, and in all likelihood put in a global bid, then why wasn’t a consortium bid the main strategy of the other player? A senior media agency professional, who did not wish to be named, said he was baffled that SPN and others chose to go solo and not link up and go the consortium route, particularly since BCCI’s ITT (Invitation to Tender) allowed a consortium bid. He also pointed out that a consortium deal would have worked out the best for the Digital contenders, as currently none of them have a sports play or the potential to monetize their investments; even if they were successful in their bid. He pointed out that in the end, the auction wasn’t a ‘fiercely fought battle’ and even though the Digital bids were high, all ended up losing as they fought a solo battle. Playing solo and concentrating only on their own strength and media piece wasn’t the right strategy against the behemoth called Star. Citing the example of Chak De India, the expert said a team always wins, instead of solo players. With IPL 10 raking in Rs 2,050 crore in revenues from Television advertising, subscription and digital advertising, will Star India hit the ball out of the park as far as revenues are concerned in IPL 11? Most analysts agree that while it won’t be a cakewalk, Star India should be able to recoup its investments and post profits (See Box). While some speculate that Star India may hike rates astronomically which the market may not be ready to pay or look at subscriptions to drive growth, it is still early days to decode what Star’s blueprint will be, come April and IPL. But a concentrated effort, smart packaging and great innovative ideas, will ensure that Star India is home. However, while IPL has come to be seen as a recession-proof property and seen phenomenal year-on-year growth figures, what could prove to be a deterrent is the larger macro-economic factors. Government policies in the recent past such as Goods and Sales Tax (GST) and de-monetization, have hit the advertising sentiment hard and it needs to be seen how global and local factors pan out in the next five years. For Star, the big thrust in generating revenues would have to be on distribution and digital Hotstar subscription, and both will need to fire on all cylinders to ensure targets are met. It’s not just BCCI that gets the huge cheque, but also each of the franchisees of IPL who will now be expecting their share of the pie. All the IPL teams can expect a larger share from the central pool. Besides Star’s payout for the media rights, Chinese handset maker Vivo’s IPL sponsorship of Rs 2,199 crore for five years could translate to BCCI writing a cheque of Rs 215 crore to franchisees, as per an analyst. As per media reports, 40% of BCCI revenues will go to franchisees from the next cycle, thereby ensuring that franchisees see a windfall. 5. IPL HAS A LONG WAY TO GO TO GAIN GLOBAL STATURE With IPL now pegged as the third costliest sports league in the world behind NFL and EPL, has IPL broken into the big league and become a global brand? The answer is ‘no’. For starters, cricket as a game is still restricted primarily to the British Commonwealth countries. Though it has been the agenda of the International Cricket Council (ICC) to take cricket beyond the traditional cricketing nations and into newer markets, ICC hasn’t been able to do that. In addition, while the IPL media rights for India have reached astronomical propositions, what many have missed is the fact that there is a diminishing value for media rights outside of India for Cricket. Though India is the primary global driver of cricketonomics, building brand IPL will be a challenge for both BCCI and ICC particularly as the value of IPL has decreased outside of the Indian subcontinent. Also, in terms of audience share and fan-base, while the billion-strong Indian population throws up huge numbers, in reality IPL still has a long way to go to catch up with the reach and build of the passionate fan base that an EPL can boast of. More importantly, Star India’s big bet is digital platform Hotstar, where subscription revenue has also not been taken into account. With Star India looking to expand Hotstar globally (it has already extended its premium subscription to US and Canada recently), IPL is the perfect property to leverage for growth, on the lines of its overall India growth strategy. Point to note here is that when Star India first bid for the IPL digital rights, it did not have a Digital platform. In a recent interview to IMPACT, Uday Shankar, Chairman and CEO of Star India had said, “Five years ago, when we thought about Digital, no one was thinking about it. Many companies that bid for the broadcast rights of sporting properties did not bid for the digital rights. In 2012, when we ventured into sports, we bid for the BCCI rights and also the digital rights, though we didn’t have a platform to use it. India was not ready for video as broadband was a problem. There was no Wi-Fi and not many smartphones in the country then. We decided to work to become part of the change process. India has proved everyone wrong, and the recent Mary Meeker Internet trends 2017 report says that Hotstar was the 8th most downloaded app in the world last year. We continue to invest in Hotstar, with an ambition to create a globally successful digital platform.”
4. FRANCHISEES SCORE HIGH BY DEFAULT
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