How the IPL Media Rights Auction indicates a new era for sports broadcasting in India
IPL's growth as a sporting property has grown in leaps and bounds with money being pumped into it rampantly. With the IPL Media Rights Auction fetching gainful bids, the future of sports broadcasting in India is set to change.
So much is similar between moths drawn to light and cricket-fever enticing India that only a little evidence from the past three days will be enough to establish this correlation. Ever since the e-auction for the IPL Media Rights for the next cycle of 5 years (both TV and Digital) opened up for bidding, sports geeks and marketing pundits alike assembled on motley social platforms to contribute to the mad buzz that magnetically hovers around cricket in India.
And the reason behind the buzz being exceptionally high on this occasion is also not a surprise - never before has the country splurged so much economically on Media Rights. The escalating numbers that we witnessed over the past few days have left us with plenty of food for thought over what the future holds for IPL and its broadcast.
Let's take a look at how the whole process of e-auction unfolded:
It's not an unknown fact that most global leagues such as the National Football League (NFL), the English Premier League (EPL), Champions League, etc. offer bundled packages for TV and Digital rights. This time, IPL followed the pursuit and went ahead with 4 different packages which were a good buildup for the mega auction.
Also, the money in sports broadcasting is huge. For reference, NFL recently finalized its new 11-year media rights agreement with a pact that will run through 2033 and could be worth over $100 bn with Amazon paying about $1bn/yr; ViacomCBS, Fox Corporation and Comcast all paying more than $2bn/yr; The Walt Disney Company (which owns ESPN and ABC) paying around $2.7 bn/yr - making up numbers that can easily boggle the mind.
Even before the e-auctions for the IPL Media Rights were set to take place, high-ranking predictions already floated with the bids expected around 50 CR to 60 CR. This eventually toned down as Amazon pulled out. The revised prediction was 45-50k CR which is how it turned out.
What were the packages?
In 2017, Star India had paid INR 16,347.50 crore for global media rights. Back then, Facebook, with a bid of 3900 crores alone had raised eyebrows. But times have changed and in another first this time around, the BCCI had split the IPL's TV and Digital Rights, offering the bidders four packages: (A) India sub-continent television, (B) India sub-continent digital, (C) India digital non-exclusive special package and (D) Rest of the world.
How did all the bidders approach the auction?
It was a no-brainer that any player would have ideally wanted the bundle but given the high interest and large values, it was always going to be hard as Package A (claimed by Star) and Package B (claimed by Viacom) were expected to fetch a major chunk of the revenue. But to the surprise of many, BCCI really hit it out of the park with Package C instead.
Also, the Package B winner would never want to let go of Package C to avoid any revenue leakage and maintain exclusivity, as both are interconnected through the digital space. But this is where it gets interesting as Package C saw a lot of competition with other players eager to bag the Package C rights and spoil the party for the winner of Package B and also build some digital presence through these 18 games, given Star has some obligations on the digital numbers (Hotstar) to their US office.
No wonder then that Package C saw some mad bidding and drew a maximum premium of over 100% and was bagged by Viacom to ensure no revenue leakage and exclusivity. Therefore, Package C was sold at INR 3,273 cr which makes it INR 33.24 cr per match for 98 matches.
It won't be wrong to believe that bidders would have realised that it would be hard to catch hold of the entire bundle, hence, Disney Star, with a ready infrastructure of multiple sports channels, including vernaculars, prioritized Package A. Viacom, who are still setting foot in the sports broadcast space went hard on digital given their stronger infrastructure there. Mind you, Jio did bid for digital rights last time around and had the third-highest bid behind Facebook and Airtel.
Package D, which comprises rights for the Rest of the World was sold for five individual regions. Entities like Times Internet, FunAsia, SuperSport, etc. were in the fray for this, however, there was no bidder from the UK despite it being one of the larger markets for IPL, to the surprise of many.
Viacom has bagged the Rights for Australia & Europe territories (UK markets included) while Times Internet has won the Rights for 2 territories. Package D which has (410 matches) has been broken down into Territory A (0.3 cr.), Territory B (0.5cr.), Territory C (0.65cr), Territory D (0.5cr), Territory E (0.63cr).
This brings the total value of all packages to 48,0400cr. which is in line with expectations of around 50,000cr.
Return of Investment & Impact on Broadcasting
From a TV standpoint, it is clear that the Ad Rates are going to be higher. We saw how Star already raised the rates of 10-second ad slots over the last 5 years. Additionally, vernacular feeds also helped them generate more inventory and thus, raise further revenues. Star clocked about 4000cr. ad revenue last year and with more games and higher rates, they are set to earn more, which means they will earn profits over their investment. Remember, Star would have the balance sheet of the last 5 years with them and would have bid accordingly.
For the Digital space, I think it's a bigger play. Cricket is just the hook. There are subscribers to be brought on the platform, their data, and then further monetization will happen one way or the other.
TV Rights earned a premium of 17% over the 49 crore reserve price, while Digital Rights earned a premium of 50% over its base price of 33 crores, indicating the digital boom that has taken the globe by storm. Interestingly, Digital Rights ended up being only 13% lower than TV Rights, but if we also include Package C, it comes out to be more than TV Rights.
The ratio of TV Rights vs Digital Rights over the years has changed significantly. In 2015, digital rights accounted for just 10% of the rights value, while in 2018 it increased to 25%. Today, they overtake the TV Rights value and contribute 51% of the Rights value, which probably is the biggest takeaway from the auction.
As per Ampere Analysis, Subscription OTT will account for 20% of 2022 sports rights spend in EU Big 5, up from 12% in 2021 and we are already seeing most of the cricket bilateral series moving to OTT platforms.
Additionally, we already saw what Hotstar could achieve. The digital platform managed a monthly active user (MAU) base of 300 million+, while the competitors could manage an MAU of around 100million and Disney+ added nearly 8 million new subscribers worldwide in the March quarter — half of them courtesy of the Disney+ Hotstar combination. The service now has over 50 million paid subscribers, accounting for 36.4% of the total paid subscriber base of Disney+.
Impact on Teams & Fans
With this level of money-pumping for the IPL, the team's brand values would go up as they get a fair share of Media Rights Revenues.
Naturally, the Player Purse would also increase to the same tune, which means players will earn more. Would this kind of money on offer tempt them to put their focus more on IPL than on other leagues and even international duty, is, however, a question for another day.
With the big money, BCCI has a big responsibility to give it back to the fans. The International feed produced by BCCI would need to be top-notch. With the advent of Web3 and the rise of sports technology, we might see a lot of innovation as well in these 5 years.
Within just 15 years of inception, IPL has managed to cross properties like EPL, MLB, and UCL in terms of valuation despite being the shortest on run time. This speaks volumes of the cricketing economy and how BCCI has amplified it with moves which will benefit the ecosystem and the fans, hopefully.