How STAR India plans to make money from mega IPL rights deal

Topics IPL

(From L to R) BCCI President C K Khanna with Star India Chairman & CEO Uday Shankar and Member of Committee of Administrators (BCCI) Diana Edulji at the auction for IPL media rights in Mumbai on Monday. Photo: PTI
STAR India, which has won global broadcasting and digital media rights to the Indian Premier League (IPL) for an eye-popping Rs 16,347 crore for five years, is relying on a twofold strategy to make money from the deal.

First, the company is banking on a minimum 10-12 per cent annual increase in its advertising and subscription revenues from television broadcasting backed by a rise in viewership. Second, it is betting big on digital and has targeted to double the time spent by viewers of IPL matches on digital platforms within a year and grow sharply because of a staggering fall in data tariffs and the growth of 4G services. This, in turn, will push its advertising revenue substantially in the next five years. 

Surely, what STAR is forking out looks expensive: At Rs 3,269 crore a year, it is over three-and-a-half times more than what Sony Pictures and other players were spending for the same rights until now. While Sony Pictures paid Rs 8,200 crore for IPL India rights for television over the past 10 years, other suitors like STAR India forked out Rs 800 crore for digital TV and global rights. 

According to STAR India insiders, viewing one IPL match consumes about 1GB (gigabyte) of data. With a tariff of about Rs 185 a GB earlier, it did not make sense for consumers to see the match on a digital platform. But thanks to Jio, the price has fallen by up to 95 per cent to less than Rs 10 a GB, and it has made seeing a match on Hotstar, the company’s digital channel, very affordable. 
Sources close to STAR say they are already seeing an interesting trend emerging — there has been substantial growth in the time spend on viewing matches on ITS digital platforms without any adverse impact on the TV viewership of IPL, which means new viewers are coming in. So, while Hotstar and its digital platform saw over 15 billion minutes of usage by consumers to see IPL this year, the amount of time spend by TV viewers was a stable around 110 billion minutes.

The sources say their business plan is based on the estimation that the amount of time that viewers spend on digital platforms to see the IPL matches would go up 20-25 per cent of overall viewing minutes (TV and digital). And, they say, there is no reason why the money will not flow in digital.  

The company is expecting that while revenues might go up slowly in the initial years, it will jump substantially later on and could be much more than Rs 800 crore a year, which is required to break even (last year it had advertising revenues of Rs 200 crore). It also expects to expand the base of advertisers to include local companies. 

According to a Ficci-KPMG report, digital advertising, which was at Rs 7,600 crore in 2016, constituting 15 per cent of overall advertising revenues, is expected to go up to Rs 29,000 crore in 2021, constituting over 27 per cent of total advertising revenues.   

STAR is not looking at any revolutionary changes in its TV strategy from that of its rival Sony. Sony, for instance, made Rs 1200-1300 crore last year on IPL advertisements and another Rs 500 crore through subscription revenues, say industry sources. 

What STAR would require is a combined revenue from advertising and subscription of about Rs 2,200 crore each year to recover their costs. That is based on the premise that Sony, which was the highest bidder, had put in a price of over Rs 11,050 for the five year rights.  

STAR hopes that with a minimum 10-12 per cent annual growth in revenue, it can easily make revenues of about Rs 12,500 crore from the property in the five years, say sources. For instance, it sees potential to increase viewership by pushing IPL a bit more in south India.   

With growing popularity of the IPL in other markets (as a lot of international players are there, besides demand from ethnic Indian population), it also expects to make money from partly selling off the global rights in digital as well as broadcasting in some areas and make reasonable revenues.

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