Viacom18's entry into sports broadcasting will make it a three-horse race

The entry of the Reliance-backed network's sports channel may disrupt the Star-Sony duopoly in the Indian sports broadcasting market

e4m by Javed Farooqui
Published: Sep 15, 2021 8:41 AM  | 8 min read

The sports broadcasting industry is all set to become a three-player market with the entry of Reliance Industries-backed Viacom18. The launch of the sports channel will help Viacom18 plug in a major gap in its portfolio. Viacom18 owns and operates 46 channels in eight languages, across general entertainment, movie, youth, music, and children’s genres.

The company has roped in Star Sports EVP Ad Sales Anil Jayaraj as CEO of Sports Business. It has also made a slew of acquisitions to beef up content for its soon to launch sports channel. The properties acquired by the network include FIFA World Cup 2022, LaLiga, Serie A, Ligue1, and Abu Dhabi T10 series.

Currently, Disney-owned Star India and Sony Pictures Networks India (SPNI) are the main players in the market, with Discovery Communications India's Eurosport operating as a niche sports channel. Five years ago, ZEEL had exited the sports business by selling Ten Sports to SPNI for $385 million. Thus, the market became a duopoly between Star and Sony.

Sports business in India continues to bleed cash due to pricing regulation and overdependence on cricket, which comes at a huge cost. The introduction of New Tariff Order (NTO) 2.0 will only make matters worse due to restrictions on bundling and the reduction of MRP cap to Rs 12 for channels that are part of a bouquet. Globally, sports derives a large chunk of its revenue from subscriptions; however, in India, it continues to be the reverse with dependence on ad revenue.

Prior to ZEEL, Disney had exited from ESPN Star Sports (ESS), its Asian JV with 21st Century Fox, in 2012. The latter had acquired Disney's 50% stake in ESS for $335 million. Subsequently, the India part of the ESS business came under Star India. In March 2019, Disney had closed a $71.3 billion deal to acquire a large part of 21st Century Fox assets, including Star India.

ITW Consulting MD Bhairav Shanth noted that more competition is always good news for an industry as it leads to market expansion. He also said that a lack of competition tends to concentrate market power and skew the market like it has been towards cricket for the moment.

“New entrants could help unlock the value other sports offer which are severely underserved right now because of lack of good production values, packaging, marketing, and visibility. There is limited space on linear TV broadcast for live sports, but when it comes to digital streaming there is quality play available for driving more value to sports fans. A case in point is an innovation like metaverse, which will take the digital fan closer to the real game as AR/VR becomes more affordable. This will open new revenue streams for the rights holders,” he stated.

He said that a surprisingly small number of people in India watch marquee sporting events that are non-cricket. A few more pedigree sporting events may find air time in India due to the entry of new players, but the question is one of critical mass, he added.

“On the 2nd screen (OTT) and connected TV  which has already become the 1st screen, in my opinion, Viacom18's entry will be a drop in the ocean given this space is all about the technology and pay per view base. We have some big names who may be eyeing this already. What stops Netflix to foray? Amazon Prime has already picked up some live sports content and for 5 years that should give us some cue. Adding to this, SonyLIV, Disney+ Hotstar, ZEE5 and many more have the stretch to dive into the race with an existing strong subscriber base,” Shanth averred.

He believes that the sports rights acquisition price, particularly for non-cricket properties, will see a substantial due to the entry of Viacom18. “With more competition and jostling for programming rights, there’s likely to be a substantial jump, particularly for properties that have been underexplored so far. This includes Olympics and similar multi-sport events, as well as sports like football, hockey, kabaddi and the like. Keeping cricket only in mind, the rates are already above average and the market has limited elasticity on an upward rights fee for cricket in specific,” he noted.

Sports management company Procam International Founder and MD Anil Singh said that Viacom18's entry into sports broadcasting will work favourably for the Indian sports industry if it helps in expanding the overall viewership pie. He also noted that Reliance has been investing in sports for the last many years.  He also believes that the cost of rights acquisition might see an escalation due to the presence of multiple competing players. Singh, however, cautioned that Reliance and other players should maintain sanity while bidding, as the viability of sports broadcasting, will go for a toss beyond a point.

According to a sports broadcasting executive with over two decades of experience, the process of correction in sports rights fees for non-IPL, ICC and BCCI properties will take a back seat due to Viacom18's entry. “As such, the cost for sports rights was skyrocketing, so it was time for a correction of cost. The entry of a big player like Reliance will mean that the correction will not happen. It will be good for the rights holder. It will also be good for viewers as they will get to watch a lot more sports content,” the executive said.

He also pointed out that sports broadcasting continues to be a loss-making business in India due to lopsided regulations. “On one hand, the price of sports rights is shooting up, particularly for cricket properties, and on the other hand, you have regulation that you cannot increase the rates of sports channels. First NTO 1.0 came in, then NTO 2.0 was brought. There will be a lot of dependence on cable operators to get subscription revenue. Moreover, advertisement on live sports is restricted to breaks,” the executive added.

He further stated that getting into sports broadcasting makes sense for a large network that has a profitable entertainment business. For Viacom18, the other big advantage is that it is part of RIL, which owns the biggest telecom operator in India. “Reliance is a different kind of company. They own the telecom infrastructure, and they will try to leverage cricket properties. For Jio, live sports might act as a catalyst for pushing broadband in the country. I am sure they have done their calculations before getting into the sports broadcast business.”

According to an executive from a rival TV network, Viacom18 might emerge as the third disruptive player in the market. “The FIFA rights acquisition is a sign of things to come, particularly with IPL and ICC rights also coming up for bidding. If Reliance manages to win both ICC and IPL, it will weaken the position of other broadcasters, who are dependent on Jio for OTT revenue. The balance of power will shift to Jio vis-à-vis broadcasters. Jio is creating its own original entertainment content, which will reduce its dependency on other players.”

Another senior sales professional from a rival network said that Reliance's entry into sports broadcasting is more about Jio than about the linear business. Having said that, the person added that Viacom18 will get a huge boost in subscription revenue if it manages to get IPL.

“For Reliance, the entry into sports broadcasting is more about Jio. The primary resource for making money will be Jio. Unlike Disney+ Hotstar which earns ad revenue, Jio will look at sports for earning data revenue. That is a bigger chunk than subscription or ad revenue. Through live sports, they will get data revenue besides subscription and ad revenue from TV. In television, it will help Viacom18 to dial-up subscription revenue. Currently, Viacom18 has the lowest subscription revenue compared to Star India, Zee Entertainment, or Sony Pictures. For them, the big game-changer will be winning IPL rights.”

An experienced sports media executive stated that Reliance's entry will not be as impactful as it sounds if it doesn't expand the existing market. He cited the example of Star India, which invested in an untested sport like Kabaddi and took it to commanding heights.

“It needs to be seen if Reliance is another competitor in the market, or will they actually change the competitive landscape by investing in smaller sports. They have been bidding for properties like IPL and BCCI rights. They have also done telecom deals for live sports. What is new is that they are launching a sports channel. Having said that, sports offers huge scope for innovation. There are so many niche sports with dedicated fan communities. Reliance has the resources, scale, and distribution to build sporting properties.”

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