Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

TODAY´S NEWS

The big deal: Rs 40 cr per match, how will STAR make it work?

The big deal: Rs 40 cr per match, how will STAR make it work?

Author | Noor Fathima Warsia | Tuesday, Apr 03,2012 2:18 PM

A+
AA
A-
The big deal: Rs 40 cr per match, how will STAR make it work?

The first reaction after STAR clinched a Rs 3851 crore deal with the Board of Control for Cricket in India (BCCI) on April 2, 2012, was that when Neo could not manage to pay Rs 32.5 crore per match, how will STAR, despite its clout, manage to pay Rs 40 crore per match. It will be an advertiser’s nightmare, some said. But industry leaders are of the opinion that this is the first deal, where the calculated risk has taken into consideration digitisation and its impact on subscription and the changing media landscape, which not only includes growth of digital media but also conversations such as revisiting commercial versus content time ratio.

Subscription revenues – a reality
At present, almost 70-80 per cent of cricket revenues for a broadcaster come from advertising sales. But as the sunset date on analogue distribution in the four metros – Mumbai, Delhi, Kolkata and Chennai – becomes a reality, the expectation of full reporting of the households in these cities, and the consequent subscription revenue, becomes an important factor. So far, service providers in the cable industry have placed orders for 8.79 million set top boxes (STBs) under the first phase of digitisation. The demand is expected to be about 10 million STBs for the four metros. An aggressive marketing campaign across channels and social media is in play to ensure that the July 1 deadline is met.

“One big difference between the bid made by STAR and any earlier bid for these rights is digitisation and subscription revenues,” explained Vikram Sakhuja, CEO, GroupM, South Asia. He added, “If all goes as planned even in the first phase of digitisation, STAR will be able to make a decent number from subscription itself.”

Shashi Sinha, CEO, Lodestar UM agreed that one of the keywords in this game was subscription. The second keyword, according to him, was dominance.

Of consolidation and domination
In a press statement, Uday Shankar, CEO, STAR India explained that it was decided between ESPN Star Sports (ESS), ESPN and STAR that STAR would bid for the rights and if it were to win the rights, “it would be exploited in collaboration with ESS”. As per this statement, while ESPN Star Sports channels in India are telecasting the BCCI matches, the controlling rights for the property lie with STAR.

STAR already brings immense power in the broadcast domain given its spread in Hindi general entertainment, Hindi movies, music, regional channels and various niche genres. With this, STAR has also got sports in its pocket.

Agreeing with this, Sinha added, “For STAR, it has clearly become a game of dominance. This will give them serious leverage in distribution control as well.”

ESPN Star Sports brings its own strength to the table. ESPN holds the broadcast rights for Australia and England cricket as well. From an Indian viewer standpoint, these countries draw immense cricket interest. These marquee BCCI rights enable ESPN to be in the market through the year, adding to its clout with both, the advertiser and the distribution networks. ESPN channels will become a powerful network as far as the sports genre in India is concerned.

The changing media landscape
Digitisation is one key aspect of how STAR’s bid is different from any earlier BCCI bids. Another conversation that cannot be ignored is TRAI’s recommendation of further cutting down ad volume on television. If this had to go through in any form, an upward change in ad rates can be expected. Sinha said, “If commercial time is decreased, the simple demand and supply mechanism will come in play and the market would see an increased rate card.”

Decrease in ad volumes is expected to benefit the big players in the industry, who are amongst the must-have for advertisers. The impact on the smaller broadcasters cannot be predicted but they are likely to face tougher times, as the advertiser may not consider increasing ad budgets but just choose the channels that are sure deliverers.

The second area that will play a role for STAR is the growth in digital itself. According to the MEC IPL TV Rating Prediction study, online is already increasing its reach for a sports property such as IPL. The point to note was that being out of home was not the only reason for people to view matches on the internet. For a sizeable number, internet was replacing TV at home. MEC forecasted that moving forward, viewership will be split between online and TV, leading to drop in television ratings.

STAR already has the digital rights for the BCCI matches for the next six years. This will be another area, where the company can work to consider monetising online viewership.

Deal cannot depend on Ad Sales alone
Cricket properties have seen an increase of rates in the last few years. Sakhuja pointed out that when it comes to the pricing for cricket or any property for that matter, the decision is completely market-driven. He said, “When cricket craze is high, there are those who have even paid Rs 4 lakh/10 seconds. There are cases where simpler properties are making money and sometimes even the strongest of properties are not able to break-even. This is not something one decides, it is what the market decides at that point in time.”

But he was also candid enough to caution that STAR’s Rs 3851 crore deal could not be dependent on ad sales alone. If there was even a small chance of subscription revenue not becoming a reality or the industry’s inability to ride the digital wave ably, it would be difficult to meet the target of Rs 40 cr/match.

Sinha reminded that this was a long-term game. The first two years may mean surviving some losses but if all is in line with STAR's planning, this could be one of the greatest gambles that STAR has played in a long time, which could bear unprecedented gains for STAR.

Write A Comment