The Star TV-Nimbus distribution deal is creating problems for broadcaster Neo Sports. The deal was in trouble as STAR India is in discussion with Nimbus to revisit the minimum guarantee amount agreed upon by both parties. Apparently, STAR, which inked a Rs 1,000 crore deal with Nimbus last year for the next four years, is looking at reducing minimum guarantee by Rs 400-450 crore.
The basis of the reduction is the culmination of various factors, the most pertinent being the government bill that has made it mandatory for private broadcasters to share feed of cricket matches with DD. With this clause, Neo Sports loses all its exclusivity of content, making it difficult for STAR India to hardsell the channel on the ground. Secondly, when the contract was inked, Nimbus had priced both its channels, Neo Sports and Neo Sport Plus, at Rs 57.50, which was brought down to Rs 37.25 by the Telecom Regulatory Authority of India (TRAI).
“With all clauses revoked, it does not make sense for STAR to continue with the same MG amount,” said a source from STAR. MSO sources also said that STAR had stop pushing Neo’s boxes on the ground for the last three months, and cable operators are also not keen to distribute the channel. The source at STAR also said that the last payment made to Nimbus by STAR was in December 2006, and that no payment had been made for the past four months. However, this information could not be confirmed.
Market information gathered states that STAR India garners close to Rs 360-400 crore annually from distribution revenue, and Rs 40-50 crore revenue from Neo Sports is too marginal an amount for STAR to continue with the deal with the current terms and conditions. The reduction of the MG amount or the deal falling apart will have serious repercussions for Nimbus. The Rs 400 crore reduction, if it happens, will be a significant dent for Nimbus’ distribution revenue. Moreover, if the deal falls apart, Nimbus will be in lurch without a platform for its channel.