Shailesh Kapoor: Star India’s IPL Win: A Big Deal!

08 Sep,2017

By Shailesh Kapoor

 

Star India’s persistent desire to dominate sports broadcasting in the country has been one of the most important television stories in India in this decade, which has generally been an otherwise poor and unremarkable one. Earlier this week, Star’s sporting agenda got a big boost in the arm, with the company bagging the global media rights for the next five seasons of the IPL.

 

There has been ample talk in the media since then on whether the Rs 16,347 crore bid is too high to make commercial sense, and how the recovery plan looks nearly impossible on paper.

 

But a deeper look at some numbers would suggest that Star’s bid was reasonable after all. The average per-season price is about three times what Sony was paying over the last nine years. But that was a base set in 2008, before the league started, with an ad hoc renegotiation in 2009. And those were only the broadcasting rights. Digital was not even in discussions then, and to Star’s credits, they took that route to enter the world of IPL, even as they waited for the big rights (TV) to come up for auctioning.

 

The best benchmark perhaps is the value of the title sponsorship rights, which were auctioned recently. Vivo won the rights for five years at Rs 2199 cr, which is an average of Rs 440 cr per season. This average was merely Rs 40 cr in the first five years with DLF, went up to about Rs 80 cr for Pepsi in 2013 and then to about Rs 100 cr for Vivo in 2016, when Pepsi dropped out. There are two levels of comparison here. One is the growth rate, and second, the absolute number itself.

 

Title sponsorship rights have grown ten-fold since the league started, and four-fold within just a year. Even if one takes Vivo’s bid as a highly aggressive one, this growth is really what the IPL has been about. When it started in 2008, it was just an experiment. Within a year, it had acquired hit status, and over the years, a certain cult status. None of this was known when the 2008 auctions happened.

 

Add to that the economic growth (at 8% annual inflation, the value should have doubled in nine years anyway), and a three-fold increase in broadcasting rights seems more than reasonable (perhaps even low), especially when you consider that digital was not a part of the Sony deal for 2008-17.

 

If you look at the absolute values, Vivo’s Rs. 2199 Cr is 13% of Star’s Rs. 16347 bid. Vivo will spend additional advertising money with Star to run their commercials during the IPL. But even if one excludes that amount, which is currently not known, 13% for just title rights vis-à-vis all broadcasting rights is quite a high share. In the last deal, this share was in the 3-5% range. Even if part of the jump is attributed to Vivo’s desperation to be associated with the IPL, one cannot help wondering if the broadcasting rights could have gone for even higher.

 

Star India would, of course, have its task cut out. IPL, with it its equity, has had its fair share of challenges, which Star will hope to address. But that’s the topic for another day.

 

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