Indian Cricket’s Rising Star

No price is too high for Indian cricket, it seems. In another round of bidding, the Board of Control for Cricket in India (BCCI) has sold broadcast and digital rights for the 2012-18 period to Star TV for Rs 3,851 crore. With a bid of Rs 3,700 crore, Multi-Screen Media, or the Sony Broadcast Group that holds the IPL rights, was pipped at the post. The cost of the 96 domestic matches India will play has been fixed at different slabs. For the two years of the remaining contract period that was earlier held by Nimbus Communication, Star TV will pay a little more than the Rs 32.25 crore per match that Nimbus was paying. However, for the next four years, Star TV will pay a mind-boggling Rs 43.20 crore per match, a 32 per cent premium on the previous contract.

The pace of escalation was set by BCCI with the base price for the auction fixed at Rs 32.25 crore and Rs 35 crore per match, respectively for the two slabs. It is no wonder that several other broadcasters, including ESPN-Star Sports (ESS), Zee TV and Times Internet, who had also bought bid documents, failed to show up.

The new round of bids was called after BCCI scrapped its contract with Nimbus Communication following continuous defaults on payments. While BCCI has sought the encashment of around Rs 1,600 crore in bank guarantees for the defaults, Nimbus is in court seeking compensation for the ‘arbitrary' cancellation of the contract.

"Between Star TV and ESS, we now have the ICC World Cup, India rights and Australia —the most important properties in international cricket," says Uday Shankar, CEO of Star India. On being asked why he had bid so high for cricket rights, he says: "Cricket is an important platform; not having the India rights is equivalent to being in the wilderness for six years."

40 cr rupees is the broadcast fee per match that Star TV will pay the BCCI

The no-show by ESS for the BCCI rights and Star TV entering sports programming has set off speculation that there is a rift between ESS and Star TV. ESS is a 50:50 joint venture between Rupert Murdoch's News Corp (owner of Star TV) and the Walt Disney-owned sports broadcaster ESPN. Sources say the joint venture terms are that either side can bid for sports rights, but ESS channels will have the first right to broadcast these programmes. Of late, ESS has been conservative in evaluating the value of cricket rights, and kept away from the very expensive BCCI auctions. However, Star TV has entered the fray to ensure ownership of these important matches stays within the News Corp fold. These matches may ultimately be offered to ESS for broadcast, say industry sources.

Is the average Rs 40-crore-per-match that Star TV will pay over six years a viable business proposition? Nimbus Communication buckled under after being able to cobble together barely Rs 15-18 crore a match at an average. Nimbus's chairman Harish Thawani believes the value of cricket rights have been eroded by over-exposure and fatigue.

Star TV sources say Nimbus was overly dependent on advertising revenue with subscription and new media revenue making up just 15-20 per cent of its kitty. "We expect to reverse the trend," says a Star TV executive. According to him, four years down the line, advertising may make up just 40 per cent of the earnings.

(This story was published in Businessworld Issue Dated 16-04-2012)