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Perspective

IPLnomics
In the first inning, IPL made money for everyone but the broadcasters. Will the next inning be any different?

Krishna Gopalan

Colour clothing, night cricket and a carnival mood that the Indian Premier League (IPL) dashed in with when it made its debut in 2008 brought back memories from Kerry Packer’s successful experiment that transformed the game in the seventies.  The similarities, however, ended there with the IPL getting mired in match fixing and dubious team ownerships. Since then, controversy has been the second name of this sleazy sporting property.

Yet, none of this has mattered when it came to making IPL the most lucrative cricketing event in any part of the world. Sports lawyer, Rahul Mehra, in all seriousness, thinks the bigger the controversy, the bigger is the prize money. “IPL has shown that bad publicity can actually work well,” he says. In 2009, SET India, now known as Sony Pictures Networks India, joined hands with the World Sports Group, to acquire the broadcasting rights for a jaw dropping $1.6 billion (₹8,200 crore). This would last till 2017 after an initial price of $1.03 billion was skillfully reworked by the Board of Control for Cricket in India (BCCI). Now, estimates point towards an acquisition cost of no less than $4 billion (₹27,000 crore) for a ten-year period.

There is no clarity on when the bids will open though, for BCCI itself is in the midst of a serious crisis ever since a report by the Lodha Committee said there was a need to overhaul the way the cricketing body functions. While this has been a serious setback to the whimsical ways of the BCCI, the bidding process for the IPL is now in a state of limbo. The bids were scheduled to open on October 25 but now there is no clarity, even more so as BCCI president, Anurag Thakur, was also recently charged of perjury by the Supreme Court.

But whenever bidding does open, can broadcasters really justify the huge surge in price? A Sony official says the network has recovered its investment and made a return of over 40% for the first decade of the IPL. “Distribution revenue is yet to seriously kick in. Once that happens, the equation will completely change,” he explains. It is estimated that Sony made ₹1,000 crore on advertising alone during the 2015 season of the IPL with another ₹500 crore coming in from distribution.The winning bidder this time will have to make a lot to justify a $4-billion investment.

For the two most obvious bidders, there is a lot to be gained if they clinch the IPL deal. Sony is fresh from acquiring Ten Sports from Zee for ₹2,600 crore, which brings to the table football, tennis, golf and cricket properties. The latter, however, is only for matches in South Africa, Pakistan, West Indies, New Zealand and Zimbabwe. These are not big-ticket countries in terms of viewership and therefore do not make any money for the broadcaster. IPL will complete the menu for Sony with cricket. It just cannot afford to let go of IPL; it accounts for 25% of revenue for the channel. In the case of Star India, it already has the rights to all cricket played in India. The network also owns the matches that India plays in England and Australia apart from the World Cup all the way to 2023. The IPL, an annual feature spread over at least 50 days, will fit into its strategy and ensure that its cricket pipeline never runs dry.

A higher cost of acquisition would mean advertisers will have to pay at least 75% more than the ₹5.5 lakh Sony charges today for a 10-second spot. By any yardstick, that is steep, though media planners think otherwise. According to Kunal Jamuar, managing partner, Havas Group, the stickiness comes from a dedicated male viewership over 50 days. “Nothing else on television can come close to IPL on this,” he says. When it comes to the World Cup, viewership is driven solely by matches that India plays in. “The IPL is not dependent on any one team — viewership comes from the presence of the big names.”

The challenge, however, is clearly in the falling viewership that was at around 3.5 TVRs (television ratings or the percentage of the target audience watching a programme). Broadcasters have made some headway with the high-definition or HD TV, which had advertisers paying ₹1.5 lakh for a 10-second spot. Though this brings in no more than 0.4 TVRs, the perception that it reaches out to a more affluent audience has helped. “Obviously, broadcasters will try and capitalise on HD TV to shore up revenues,” says Jamuar. How much more can this be leveraged in terms of pricing is the question.

It seems the broadcasters may be left with very little on the table this time around, but it is a price they got to pay to stay relevant.

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