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BCCI Expects Broadcasters To Pay Rs 16,000 Crore As IPL Fee

Thursday, Jun 16, 2016

The "multifold" increase in its fee that the Board of Control for Cricket In India (BCCI) expects from broadcast rights for the Indian Premier League (IPL) may not be a feasible proposition for most broadcasters, considering the revenue the current licence holder makes, media experts say.

Sony Pictures Networks India (SPN), which holds broadcast rights until 2017, made just under Rs 1,000 crore from sponsorships and advertisements in the 2015 edition of the league. In 2016, its revenue rose marginally to Rs 1,050 crore.

SPN paid Rs 8,200 crore for 10 years in 2008 — Rs 820 crore a year. If the price doubles, to over Rs 16,000 crore or Rs 1,600 crore a year, for the next 10 years, the broadcaster that gets the rights might struggle to scale up revenue to a level where it can be profitable, said a senior executive of an integrated media agency.

"I can't see how a multi-fold jump in the licence fee is possible. It (IPL) is a good property without a doubt, but expecting a double or more than that increase is like killing the goose that lays the golden egg," he said. This executive and several other media professionals that ET spoke to didn't want to be named. Apart from SPN, which has the first right of refusal for the broadcast licence when it comes up for renewal, the other big contender would be Star India.

Star currently holds all other big cricket related broadcast rights in India and IPL is the last frontier it wants to capture. SPN, on the other hand, is working on building up its sports portfolio.

It recently collaborated with ESPN to launch the SONY ESPN cluster of channels. Apart from the IPL, which is its big showcase, SPN has the rights to broadcast the ongoing UEFA EURO 2016 and Copa America, 2018 FIFA World Cup, FA Cup, BBVA LaLiga, Tim Serie A and the Australian Open, among other sports events. "This will be an interesting fight.

BCCI will definitely want to milk the rights. The sense in the market is that both SPN and Star India will be looking at anywhere between $2.5 billion and $3 billion (Rs 16,750-20,100 crore)," said a top executive from another media buying agency. At $3 billion, it will be a huge stretch, the executive said. "The negotiations have just started. SPN will be making an offer with a modest increase, which then will push the BCCI look for more options and come back to SPN to see if they want to match, " he explained.

Over the years, IPL has shown a 10-15% increase in advertising revenue and analysts don't see any immediate disproportionate jump. While SPN might have broken even on IPL, the margins have not been very high. "If the rights fee is doubled, to achieve those kinds of numbers, any network will have to reinvent its game. It might be a huge challenge considering a lot of innovations to shore up revenues have already been tried in the last few years," said a media planner.

Eventually, like in the West, it is subscription fees that will have to support the massive hike in the rights fee. "The increase in IPL rights value in the next bid will come mainly from the ability of the rights holder to drive subscription revenue rather than from advertising," said Vikram Sakhuja, group CEO, media & OOH, at media agency Madison.

Another media professional said there has been regular 10-15% growth in advertising revenue, but that alone cannot take the entire load. "The broadcasters will take into consideration that by 2018 digitisation will be over and distribution revenue will also kick in," he said. In the West, subscriptions usually make up for more than 70% of overall revenue. In India it is currently just the opposite.

 

Source : economictimes.indiatimes.com

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