Winning the rights would have given the Ambanis a big boost, say analysts, in increasing data usage for the 160 million Jio customers
Will acquiring the Board of Control for Cricket in India’s (BCCI’s) rights for bilateral international cricket matches in India be the winner’s curse for STAR India?
Or will the acquisition reinforce STAR India’s top position in cricket telecasting by increasing the gap with its traditional rival Sony and keeping Mukesh Ambani’s Reliance Jio away for a second time from winning coveted cricket rights (the first time was the Indian Premier League, or IPL), which not only drive customers but also bring in huge advertising revenue as well as subscriptions.
The Ambanis, who have built a media empire, recently took a majority stake in Viacom 18, the company that runs a bouquet of channels led by Colors, and is fighting a headlong battle for viewership in the general entertainment space with STAR India.
What Viacom does not have is a sport channel, which it has avoided because of the high cost of acquiring sport properties.
Winning the rights would have given the Ambanis a big boost, say analysts, in increasing data usage for the 160 million Jio customers, who are looking for compelling content, and cricket is a no brainer. It could have also given Viacom 18 an opportunity to fill a gap for a cricket property. Jio is launching fibre-to-home service, which will be driven by content and TV services, taking on Rupert Murdoch’s DTH business in Tata-Sky.
But STAR India has to pay a stiff bill not only for the BCCI rights but also grabbing the rights of the IPL, also for five years, and that is Rs 44.956 billion (BCCI and IPL) every year, more than double the advertising revenue that flows to cricket currently.
And while it has bid very high to win against all odds, its challenge now is to make money. The enormity of the task can be seen in the fact that currently advertising revenue for cricket on TV is around Rs 20 billion, of which the IPL generates more than Rs 13 billion. Digital advertising last year generated only Rs 2 billion, primarily from the IPL to STAR’s Hotstar, and, despite all the promise, has a long way to go.
So the money-making equation has to change dramatically. STAR sources say they will not be able to break even on day one, but the properties are attractive. Some say it has overbid for both the properties and it might not be able to break even at all and has overestimated the revenue-generating potential for digital. They say that unlike in other countries where sport properties are sold high, India does not have the potential for subscription revenue to go up for a long time, so that one can reduce dependence on only advertising. (more)
