Empowered with IPL rights, is Star better prepared to counter TRAI order implications?

Industry is confident that Star India will have innovative strategies in place if TRAI's tariff order gets a go-ahead

With Star India winning the IPL media rights for Rs 16347.50 crore, subscription revenue will be one of the important drivers for the network to recover this amount. How will that play out if TRAI’s tariff order gets green-lit by the law? The order will drastically alter television consumption and disrupt the existing subscription revenue model. Most of the industry insiders we spoke to are confident of Star India’s innovative strategies around pricing and packaging to achieve profit. They are sure that with its strong distribution muscle the network would be able to double the viewership of IPL.


According to industry sources if TRAI’s tariff order passes then Star India might opt for splitting the telecast of IPL tournament into three-four channels which they will price at Rs 20 each. “So then operator has no option but to go for all those channels. So the IPL matches have to be spread across its channels. That’s a revenue generator for Star India. Also with Star having rights of other cricketing properties it might utilise it. But the ruling can also get delayed with so much happening in distribution. So we have to wait and watch,” said an industry insider.


Ashish Bhasin, Chairman & CEO, South Asia Dentsu Aegis Network, also agrees that IPL gives Star India a good leverage to increase subscription revenue. He says, “Star India, I am sure, will explore several revenue streams. Advertising is a very important stream but there is a limit to which one can hike the advertising rates. Therefore subscription revenue becomes important. They have a bouquet of channels and understand the game of distribution better than anyone else. Of course they have to comply with TRAI’s tariff order. But around that they will find the best way to optimise. IPL gives them a good leverage to increase their subscription revenues because subscribers will be asking cable operators for it. Also it may not be that lucrative through advertising revenue alone, given the prices it has gone for. But add on a sharp increase in subscription revenues and it will be another story altogether. That’s how it is likely to play out."


Sandeep Goyal, Vice Chairman of The Mogae Group added that the potential to increase monetization would be highest at the distribution level and Star could churn at least Rs 1,000 crore per annum just here.


Anita Nayyar, CEO India & South Asia, Havas Media, feels subscription will form a decent part of their revenue. But the industry should be able to absorb the pricing irrespective of subscription or advertising market. She says, “Now with all cricket consolidated with Star India they will have to look at innovative ways of pricing and packaging to recover money. But pricing shouldn’t be such that it creates barriers for advertisers. Every year there is a minor hike in IPL prices anyway because it’s a prime property that delivers. Now if an a-la-carte model works then they have to work around their pricing which I am confident about. But having said that, whether it’s subscription or advertising market the industry should be able to absorb the pricing. I am sure they have some strategy up their sleeve.”


Vikky Choudhry, MD, Home Cable, thinks otherwise and points out that with India’s price sensitive nature, it will be difficult for Star India to recover the bidding amount. He adds, “Also IPL takes place for 58 days. What about the rest of the year?” 


In 2017, during the 10th edition of IPL, Sony is estimated to have earned Rs1,300 crore as advertising revenue and Rs 400-500 cr from subscription, and Hotstar, which had the digital rights, Rs120 crore. Star will have to significantly better those numbers for it to make profits on its IPL investment. Industry insiders said that for the first few years Star India may not break even, but with time the franchise will earn them significant revenue to eventually break even.


According to the TRAI tariff order, broadcasters are required to offer their pay channels on a standalone or a-la-carte basis. They have to declare the monthly maximum retail price (MRP) of the channel with the condition that no pay channel, which is part of a bouquet, is priced above Rs 19. Free-to-air (FTA) and pay channels have to be segregated in different bouquets with the MRP of a pay channel bouquet being not less than 85 per cent of the standalone cost of all the pay channels forming it. The tariff order dispute neared its culmination on July 31 with the division bench of the Madras High Court reserving its judgement in the case. Verdict is expected to be announced soon. 

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