Star India CEO Opens up on the Mega Rs 16,347-Cr IPL Rights Deal
Star India has bagged the media rights to the IPL for a record Rs 16,437 crore for the next five years.
Star India Pvt Ltd bagged the media rights to the Indian Premier League for a record Rs 16,347 crore for the next five years, establishing the media house’s virtual monopoly over cricket content in the country.
The media house will pay around Rs 50 crore for broadcasting one IPL match, compared to nearly Rs 43 crore for international tests, Chief Executive Officer Uday Shankar told BloombergQuint in an interview. The increased demand and popularity of the T20 format of the game prompted this bid, he said.
“Every single IPL game delivers committed viewership”, he stated, adding that Star decided to aim for television rights after receiving robust viewership on its digital platform Hotstar during the previous IPL edition. "We saw the power of IPL through Hotstar last year”, he said.
Star’s total global bid was more than the combined highest bids in various segments, which was the reason why it was awarded all the media rights by the Board of Control for Cricket in India. The media rights include broadcast (TV) and digital (mobile and internet) for various regions namely India, Middle East, Africa, Europe and America.
While the bid was an “aggressive and risky call”, Shankar said that the company’s strategic agenda would’ve been only served best if it won all media rights.
Shankar said that everyone is shocked because of the historical value of the media rights. Sony, which used to earlier televise IPL for the last 10 years, had bought rights at Rs 8,200 crore in 2008.
Back then T20 was an emerging format and the IPL was untested, Shankar said. “The world has changed, IPL has changed and cricket has changed since then”, he added.
On the fading popularity of television due to a rise in digital content platforms and cheaper data, Shankar said, “TV is not going anywhere as its the cheapest form of consuming content”. While with Hotstar, the “rate of scaling is attractive”, he added.
Here are edited excerpts from the conversation:
How did you manage to come to a number that outstripped everyone?
One thing that came out very clearly in this tender was that everybody had identified their areas of interest, where they wanted to put all their resources. So, Sony had identified television and they had put a very aggressive bid. The digital players including telecom companies put in very aggressive bids for digital rights.
Similarly, for the rest of the world, individually each market saw some really aggressive activity. We have a presence in each of these, and we have a robust TV network through Star Sports, we have Hotstar, which is probably one of the most exciting platforms globally, and definitely the most exciting platforms to have come out of India. And then we have distribution all over the world. We are also now at a stage of Hotstar’s growth, where we are seriously looking to take it global. For us, it made sense to win all of this. And we decided that we are going to be very disciplined.
We didn’t have TV rights of IPL for 10 years. We decided we could live if we didn’t win all of it, but our strategic agenda would be best served if we had all. Then we would have the flexibility of being able to use it in whichever manner we wanted to use.
It was an aggressive call, it was also a very risky call. We could have come back without anything but luck smiled on us.
All or nothing was the strategy. Even more so, because of the rule that if the addition of everyone else’s bid was more than your global bid, you might not have walked away with everything.
It was very clear that the sum total of the leading bidders in each category, had to be lower than the global consolidated bid. But we were ahead on the global consolidated value by about Rs 500 crore, just as you said – that’s why we got it.
What was the idea behind the calculations?
So you decided on the minimum number that gets you a chance of a shot at it. The number that came up with everybody’s analysis was Rs 16,347 crore. Everybody is looking very shocked because of the historical value of IPL was 10 years ago. But the world has changed since then. IPL has changed since then. Cricket has changed since then.
Ten years ago T20 was still an emerging format with no major tournament. IPL was totally untested, untried. Nobody believed that there could actually be a city based league of cricket that would play out every night and people would watch it. And hence, it got the value it got. Today T20 is the most exciting format, it has brought in new categories of viewers – women, children, non-traditional sports fans – all of whom have widened the universe of cricket lovers. You also see a situation where Star itself has been paying Rs 43 crore per match for BCCI bilateral rights, which also include test matches.
Imagine if you have to pay Rs 43 crore for a test match between a small cricketing nation and India which goes on for five days, and gets a fraction of viewers that IPL gets, which one works better? To pay Rs 50 crore or so for an IPL game, or Rs 43 crore for a test match. That’s where the difference is.
That’s interesting. Because you now pay more for an IPL game, than for an international match. And that purely based on the amount of viewership it garners in India?
It’s two things: One, of course, the viewership, we pay more for this. The BCCI rights were tendered six years back. You should compare when the next tendering for BCCI rights happen. And IPL, every single game delivers committed viewership. We have seen the power of Hotstar when for the past three years we had the digital rights. Even though it’s five minutes delayed, it creates a huge amount of excitement in digital as well.
Any data you can share with us?
Digital data is in public domain, we have all known, what it does. Frequently we cross a billion minutes consumed every day on IPL. Those are gigantic figures.
What are the revenues you are expecting now after you have won this bid?
IPL is already very well monetised. From the published data that we see on media reports, etc Sony had made Rs 1,300 crore in advertising revenue last year. We have seen the numbers for Hotstar, those are really very exciting. The beauty is that, if you see the digital giants, the value they put for the digital rights, tells you what’s the level of excitement, and these are early days. And digital revenue is doubling year-on-year. So, you want to take a position in both TV and digital, I think in next 5 years, TV is not going anywhere. TV will continue to be robust and big. Because TV in India is still the cheapest form of consuming content.
And digital, as data prices are crashing, and as more and more high-quality broadband and WiFi is becoming available, as more and more smartphones are coming in, and telecom companies are pushing more and more aggressive, innovative models for data consumption, I think digital will be really big. And on top of that, our agenda of taking Hotstar beyond India is very well served. I think both are very distinct pools and have their own possibilities, some of them clearly give you very compelling financial logic, some of them, in addition, will give you a strategy for building a business in future.
What are the growth plans for Hotstar?
We already have a really rich spectrum of content on Hotstar. We have a lot of sports, cricket of course, but beyond cricket as well we have the English Premier League rights, global football. We have all the other Indian domestic sports that we are involved with. Star is also the biggest producer of original drama in Indian languages. All of it available on Hotstar. Then we have some unique deals we have with big and high-quality content providers like HBO, Disney, Fox.
Does it generate revenue yet. For a group like Star India, how big is Hotstar? Where do you see it going?
We don’t like to do anything in this company that doesn’t generate revenue. We are a very business-focused company. Obviously, everything has different phases of maturity and hence that determines the amount of revenue it will generate. Our television entertainment is in a very robust phase. We have a good spread in multiple Indian languages. from north to south India, from Bengal to Kerala. We have built commanding leadership in many of those market. That gives us the strength to go and invest in other business, whether it is sports. Five years ago when we started investing in sports, it was said no way was it going to make money. Now the same is being said about Hotstar. It is still less than three years old.
In terms of both consumption and revenue, Hotstar is doing really well. And we believe the rate of scaling up will be very attractive in Hotstar. We need to keep building it up.
For the group, how big a proportion is sports compared to entertainment? Has that moved a bit or is it still very entertainment heavy?
Entertainment is a very steady, mature state. It is the strength of our entertainment business that gives us the ability and the strength, to go and build new businesses and make new investments. If we didn’t have the kind of entertainment core that we have, we would never have been able to get it sports and build it with such a disruptive mindset, that we took strong position on cricket, but we went way beyond cricket for developing and growing sports that nobody thought made any sense - like kabaddi, hockey and the number of leagues that we have been associated with. All of that comes with our position in entertainment. So entertainment continues to be our core but allows us to go and do new things. And now digital. They all come together. Because if we didn’t have access to the entertainment content that we have, and if we didn’t have the propriety rights for all the Indian drama, we won’t have been able to go and do Hotstar.
(The article was originally published on BloombergQuint.)
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