Market Insight

Star India acquires Indian Premier League rights

September 04, 2017  | Subscribers Only

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Associate Director, Service Providers & Platforms
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Star India, the 21st Century Fox- owned broadcaster, has won the auction for rights for the Indian Premier League (IPL) for the five-year period from 2018 to 2022. Star India paid $2.56 billion  for all seven categories of rights, including TV and online rights in India and five packages covering the rest of the world. Sony Pictures Networks India, the previous owner of rights to the one-day cricket league, paid $1.63 billion in 2009 for the nine-year period 2009-2017. 

A total of 24 companies expressed an interest in rights to the IPL—which features matches between eight teams representing Indian cities and features local and international star players—but only 14 submitted bids. The auction was supposed to have taken place in October last year. However, the whole process was suspended by the Supreme Court pending a financial audit of BCCI, the governing body of cricket in India and the organiser of the auction. 

Our analysis

The IPL auction attracted bids from companies including Indian power-house Reliance Jio, Facebook and BeIn Media. Despite the huge hike in revenue–from $181 million under the Sony deal to $512 million a year–the IPL will still generate a fraction of the revenues accrued by the major sports leagues in the US (NFL, NBA, MLB) and in Europe (Premier League and La Liga). The annual revenue for the IPL will, next year, will be less than one third of the annual worldwide rights revenue for La Liga and one seventh of the revenues for the Premier League.

However, these leagues are much more established than IPL, which only launched in 2006 and has yet to reach its full potential with cricket fans outside India. 

In its home market, the IPL has already developed into a massive property.According to figures from BARC (the body responsible for TV audience measurement in India), in 2016 the IPL recorded a cumulative reach of 361 million viewers, a figure that represents 52% of TV viewing households. Viewership rose to 387 million in 2017 according to the latest BARC data.

Cricket is the most popular sport in India and the IPL has established itself as a premium sport. A clear indication of the value that the Indian TV market is attributing to the IPL can be gained by looking at the TV advertising revenues of Sony, the broadcaster that controlled the IPL rights for the period 2009-2017: In 2016 the ad revenues reported by Sony as directly deriving from the IPL were 12 billion rupees. According to IHS Markit Advertising Intelligence this figure represented 24.3% of the total TV ad revenues for Sony. It is telling that a sports event that lasts only seven weeks a year is responsible for generating a quarter of the total ad revenues for the whole year.

Outside India, Star's targets will be the South Asian diaspora in Europe, North America and the Middle East, as well as cricket fans in other countries where the IPL faces competition from other forms of cricket, including local leagues using the same twenty over a side format. The IPL is starting to gain traction: England players were released to play in the league last year with Ben Stokes becoming the most expensive IPL player. Star India sister company Sky held the rights to the IPL last season.  

The inflation in viewers has been matched by the cost of rights: In 2008 the Singapore-based sports marketing agency World Sport Group acquired the IPL rights for a ten-year period (2008-2017), paying $918 million. World Sport Group then sub-licensed the rights to Sony (or Multi Screen Media as it was called then). However, one year later, in 2009 the rights were re-sold directly to Sony, this time for sum of $1.63 billion for a nine-year period (2009-2017). This transaction represented a 97% rise in the value of the rights just one year after the signing of the first contract. The current deal represents an even more impressive 183% growth over the previous contract.

The acquisition of the rights will certainly strengthen the position of Star India as the top sports broadcaster in India vis-à-vis its main competitor, Sony. Star India can capitalise on this success to further boost the market share of its online platform, Hotstar, which has held the IPL online rights for the last five years. Star India indicated in 2017 that it is planning the international expansion of Hotstar and the IPL will serve the purpose of addressing not just the large Indian diaspora but cricket fans all over the globe as well.

On the other hand, the loss of the rights is a blow for Sony. Sony paid $385 million in August 2016 to acquire Ten Sports Networks (six HD sports channels) from Zee Entertainment. This move was meant to cement Sony’s position as one of India’s leading sports broadcasters, particularly in the national sport of cricket. Sony still controls key sports content like football (UEFA Champions & Europa League, FIFA 2018 World Cup, La Liga and Serie A), wrestling (WWE), basketball (NBA) and tennis (WTA) and needs to implement a clever marketing strategy to enhance the appeal of this sports content among Indian TV viewers. 

21st Century Fox
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