IPL rights: JM Financial gives thumbs up to media bids, expects bidders to break even

The JM Financial report says IPL ad rates on TV for a 10-sec spot will go from Rs 15.7L to Rs 18.2L in 2027. For Voot, no. of incremental subscribers expected to jump from 25 mn in ’23 to 70 mn in ’27

e4m by Javed Farooqui
Published: Sep 23, 2022 7:49 AM  | 4 min read
IPL

Ever since the Indian Premier League (IPL) media rights got sold for an eye-popping Rs 48,390 crore in an open auction, questions have been raised over the viability of the bids. Is there a method to this madness – this is an oft-repeated question ever since Disney Star and Viacom18 acquired the IPL TV and digital rights, respectively, by committing a massive sum of money.

New research by JM Financial attempts to throw light on the level of monetisation that both the rights owners - Disney Star and Viacom18 - can achieve over the next five years. The report states that the IPL TV rights owner Disney Star can expect to make profits from the third year (2025) while the digital rights winner Viacom18 will have to wait till the fifth year (2027) to ring in the profits.

The report estimates that Star India’s IPL-driven ad revenue (live + repeat) can grow from Rs 4100 crore in 2023 to Rs 6100 crore in 2027, at a CAGR of 10%. The ad revenue growth will be driven by a 6% volume CAGR (number of matches going up from 74 to 94) and a 4% pricing CAGR. Disney Star is estimated to garner over Rs 25,000 crore in ad revenue to break even on its IPL investment.

A typical IPL match has 325 ad spots and the total ad inventory will increase as the number of matches increases from 74 in 2023 and 2024 to 84 matches in 2025 and 2026 and 94 matches in 2027. The report projects that the IPL ad rates on TV will jump from Rs 15.7 lakh per 10-second spot to Rs 18.2 lakh per 10-second spot in 2027.

"At an annual media rights cost of Rs 47.15 bn (5-year rights cost at Rs 23.6bn), Star India can break even in 2025, the third year of the current cycle," the report said. The stock broking and investment firm noted that it has not assumed any incremental subscription revenue for Star India as they are the incumbent broadcaster for IPL.

On Viacom18, the report stated that IPL will catapult the network's streaming platform Voot to the top of the heap in the OTT pecking order. Voot, it added, will also benefit from Reliance’s parentage as it can ride on Jio’s 400 million strong telecom user base. For Voot, the number of incremental subscribers due to IPL is expected to jump from 25 million in 2023 to 70 million in 2027. The platform's ARPU for IPL could rise from Rs 198 in 2023 to Rs 435 in 2027.

The report estimates the cost per mile (CPM) rates for mid-roll ads will remain at Rs 200 for all five years of the rights cycle with per match ad revenue expected to increase from Rs 5.1 crore in 2023 to Rs 14.3 crore in 2027. The CPM rates for pre-roll ads are projected to increase from Rs 180 to Rs 229 in the fifth year. The ad revenue per match for pre-roll ads is expected to grow from Rs 3.6 crore to Rs 11 crore in the final year.

The report has projected that Voot’s Monthly Active Users (MAU) can reach 400 million by 2027 (up from Disney+ Hotstar’s 300 million MAU), thanks to IPL. Further, the platform is expected to garner ad revenue of Rs 2160 crore and subscription revenue of Rs 3000 crore by 2027 from IPL alone, which is more than the average annual licence fee pay out of Rs 4100 crore.

Over the five-year period, Voot is projected to collect ad revenue of Rs 6800 crore and subscription revenue of Rs 8470 crore. This, the report said, translates to cumulative revenue of over Rs 15,000 crore from the IPL, thereby falling short of the media rights value it has paid on a cumulative basis. That said, the knock-on effect of IPL should help it recoup the media rights’ investment, the report added.

The firm stated that IPL accounts for over 60% of cricket’s AdEx and 5% of India’s overall AdEx. The 3x increase in the price of IPL’s recently auctioned media rights suggests IPL’s share in India’s AdEx is likely to increase substantially in the coming years, it noted.

It also pointed out that the IPL ad revenue grew significantly despite significant participation from the country’s largest advertising industry (FMCG) and despite being held in a traditionally soft first quarter (non-festive season) speaks volumes about the immense AdEx potential of the league.

IPL, the report said, also acts as a natural user acquisition funnel for video streaming platforms, sports portals (ESPNcricinfo, Cricbuzz, etc.), and cricket-based fantasy sports apps (Dream11, My11Circle, etc.). The user base in the entire sports and related media ecosystem swells during the IPL season.

"A BARC-Nielsen report estimates that the active user base of Disney+Hotstar (OTT platform that streamed IPL 2020), sports news portals/apps, and fantasy sports platforms nearly doubled in the first week of IPL 2020 versus a week before, indicating the strong pull that the league wields. Conversely, consumption of other media and entertainment segments goes down," the report said.

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