ADVERTISEMENT

IPL Media Rights: Winner's Curse Or Money-Spinner? Analysts' Take

Here’s what analysts have to say about IPL’s media rights auction…

<div class="paragraphs"><p>IPL trophy. (Source: IPL website)</p></div>
IPL trophy. (Source: IPL website)

Viacom18 Media Pvt.’s streaming rights win for the next five seasons of the Indian Premier League is likely to boost Reliance Jio Platforms’ content pool, though “monetisation” is key given the higher investment in bidding, according to analysts.

Viacom18, part of Mukesh Ambani-controlled Network18 Group and backed by James Murdoch and media veteran Uday Shankar, bought packages B and C, the digital rights for the subcontinent and the non-exclusive digital rights for 18 important matches (opener, finals, three play-offs and few double weekenders), for Rs 23,758 crore.

Along with Times Internet, it won Package D—the overseas rights—for Rs 1,060 crore.

Disney Star won Package A, consisting the TV rights to broadcast the world’s second-most expensive sporting event in the Indian subcontinent, for Rs 23,575 crore.

Together, the broadcasting rights auction fetched India’s cricket board Rs 48,390 crore for the next five years, nearly three times what it earned from Star in the previous five-year contract. The base price was Rs 32,890 crore.

Analysts, including at CLSA and Bernstein, considered the premiums the rights went for, what it will take for the bidders to be on the path to profitability and listed various implications the auction will have on the media industry here on.

Here’s what analysts have to say about IPL’s media rights auction…

BofA Securities

  • Maintains ‘buy’ on Reliance Industries on favourable risk-reward.

  • Made sense for Viacom to bid for package C to maintain exclusivity in digital coverage.

  • The digital media rights have emerged slightly higher than TV broadcasting rights given increasing shift to digital viewing in India. Monetisation is key given the higher investment in bidding.

  • While Viacom has won the rights, the mobile arm Jio would act as an exclusive digital distributor for the IPL rights. Jio’s improving fixed broadband rollout in coming years could further improve the monetisation beyond mobile screens to “high ARPU” smart TV audience. Currently OTT subscription monetisation doesn’t work well in India and is limited to limited top-end users.

  • Jio/Viacom would monetise this via transactional and ad-led model. In transactional model, users would pay the fee (we estimate Rs 20-80) for one year of IPL. We think ability to sell ads on digital platform would be better than linear platform given better data analytics.

  • The potential for ad increases if it is bundled with an impulsive purchase of commerce or food during IPL events. If marketed properly, we think Jio has potential to poach users from telco competitors to watch the content.

  • Apart from IPL, BofA thinks RIL is looking at movie content as “Cricket+ Bollywood” combo would aid better monetisation.

  • Market expectations of Zee getting IPL broadcast rights were low as Zee had exited sports. Update on the announced merger with Sony would be the primary driver for Zee fundamentals. Expect Zee to continue to focus on its current content strategy on general entertainment, movies and regional.

  • The merged entity may also bid for non IPL cricket rights: inline with Sony’s current strategy. In the era of shift towards digital screens (both Smart TV and mobiles), it remains to be seen how much digital cannibalises linear TV ad, especially for marquee events like IPL.

  • Hence, don’t think its negative that Zee/Sony didn’t get the linear IPL rights as returns on such investments is unclear.

Bernstein

  • Full digital rights (package B and C) went to Viacom 18, making it as expensive as the TV rights. This also gives Viacom 18 full monopoly over the digital rights.

  • Bundle C went at a premium of about 108% to base prices, highlighting the importance of the 18 matches during a season. These non-exclusive rights going to a different broadcaster could have led to pricing pressure and undercutting in ad slot rates during these matches.

  • IPL has become one of the most expensive games in the world, with a combined value of Rs 150 crore a match. This is only behind NFL, which has a value of Rs 131 crore a game and ahead of the Premier League, which has a value of Rs 79.5 crore per game.

  • OTTs such as Disney+Hotstar witness a surge in monthly active users, during events such as IPL/ ICC World Cup’s/T20 World Cup. During these periods, levels of daily and monthly active users are elevated at 30-40% higher than average levels, while monthly app downloads are 1.5-2x more than average downloads.

CLSA

  • Has a ‘buy’ on RIL with a target price of Rs 2,627.3 apiece.

  • Analysis shows 15% CAGR in ad revenue is needed for the next five years to equate to the Disney Star TV rights bid cost, while 57% CAGR in ad revenue is needed for the next five years to equate to the Viacom 18 digital rights bid cost.

  • Viacom 18 OTT Voot has been lagging, and the IPL digital rights loss will be a significant hit to Disney Hotstar. Meanwhile, Zee-Sony did not win IPL rights but will likely gain from the improved competitive landscape in OTT.

  • TV rights bidding has likely been rational versus IPL digital rights wins, especially as TV could see a windfall in subscriptions if TRAI’s new consultation ends the pricing embargo and sports channels could be better monetised structurally in the future.

  • However, the Viacom 18 digital rights win could boost Reliance Jio Platforms’ content pool significantly, and digital rights exclusivity could boost Reliance Jio data subscribers.

Kotak Institutional Equities

  • TV rights: Star (Disney) garnered ad revenue of Rs 3,000 crore (Rs 40 crore per match) and subscription revenues of Rs 750 crore (Rs 10 crore a match) for IPL 2022. Its winning bid of Rs 57.5 crore a match for IPL 2023-27 implies cost of Rs 61 crore per match (including production costs).

  • A 50% increase in per match monetization (2023-27 average) versus IPL 2022 is required for break-even. Disney is betting on IPL continuing to gain share in TV adex, further widening of ad yields between IPL and general entertainment channels, no meaningful TV-to-digital shift for IPL, and no impact of more matches (94 matches from 74 now) on per match monetization.

  • Digital rights: Hotstar garnered ad revenue of Rs 1,100 crore (Rs 15 crore a match) and subscription revenue of Rs 1,200 crore (Rs 16 crore a match) for IPL 2022 season. Viacom 18’s winning bid of Rs 58 crore a match for IPL 2023-27 implies cost of Rs 63-65 crore per match, including production/hosting costs. It looks like Viacom 18 would incur losses (deemed customer acquisition cost for building a strong streaming platform) in the initial years and perhaps break-even in 2026/27 seasons.

  • Irrational competition poses risk to the above assumptions. For instance, Viacom 18 can make IPL free on its OTT platform (higher ad revenues could offset loss of subscription revenues) to accelerate TV-to-digital shift compelling Star to put IPL on free-to-air channels.

  • Competition between Disney and Viacom 18 for ad dollars could reduce bargaining power of both versus that enjoyed by Star during 2018-22 when it owned both rights (TV + digital).

  • Steep rise in the price of media rights would benefit BCCI and IPL teams: valuations of RCB (United Spirits), SRH (Sun TV) and CSK could increase to Rs 7,500-9,000 crore given improved economics.

  • The success of IPL augurs well for Dream 11. Zee/Sun could see some pressure on ad revenues/yields with IPL gaining ad share. Viacom 18 (RIL) would likely leverage IPL to build a successful streaming platform. We do not see any upside for Disney (Star).