Reliance, Disney Star & Sony may not have big purses for India’s cricket matches at home

Reliance, Disney Star & Sony may not have big purses for India’s cricket matches at home

The Indian cricket board (BCCI) is projected to generate a substantial revenue of around Rs 6,500 crore to Rs 7,500 crore by selling the separate television (TV) and digital rights for India’s home cricket matches. However, it’s noteworthy that the base price for these rights in the current cycle is 25% lower per match compared to the previous cycle. These insights were provided by Elara Capital, a financial advisory firm.

Elara Capital’s analysis suggests that the BCCI is likely to exceed the base price by a factor of 1.6 to 1.9 times, translating to a potential increase of approximately 32% compared to the rights’ value in the earlier cycle. This expected increase in revenue can be attributed in part to a reduction in the number of matches by 15% in the current cycle compared to the previous one.

The current base price set by the BCCI for these rights is Rs 450 million per match, which is significantly lower than the previous cycle’s price of Rs 600 million per match. This 25% reduction in the base price reflects a strategic adjustment, potentially aimed at enhancing competitiveness and attracting more bidders for the rights.

In conclusion, the projections made by Elara Capital suggest that the BCCI is likely to see a substantial increase in revenue from selling TV and digital rights for India’s home cricket matches, despite the lower base price per match in the current cycle. This strategy is expected to result in a higher overall revenue due to the anticipated higher bids, with a smaller number of matches in the current cycle compared to the earlier one.

The upcoming five-year cycle of India’s home cricket matches, spanning from 2023 to 2028, is estimated to have a combined base price of Rs 3,960 crore for a total of 88 matches. This value encompasses both television (TV) and digital rights. Specifically, the TV rights carry a base price of Rs 20 crore per match, while the digital rights have a base price of Rs 25 crore per match. This information was highlighted by Elara Capital.

Elara Capital’s analysis indicates that the Board of Control for Cricket in India (BCCI) is anticipating bids of at least Rs 60 crore per game during the auction process. This projection, if realized, would lead to a total revenue of Rs 5,280 crore via the eAuction process.

This suggests that the BCCI is confident in the potential to exceed its own set base prices through competitive bidding. The projected minimum bid of Rs 60 crore per match is substantially higher than the base price of Rs 20 crore for TV rights and Rs 25 crore for digital rights. If these projections materialize, the BCCI could secure significantly higher revenues than the base price during the auction.

In summary, the projected minimum bid per match for India’s home cricket matches, as estimated by Elara Capital, is expected to exceed the base prices set by the BCCI for both TV and digital rights. This suggests a strong demand for broadcasting rights and a potential for higher revenues for the cricket board during the upcoming auction process.

The analyst from Elara Capital, Karan Taurani, has indicated that the Board of Control for Cricket in India (BCCI) might consider canceling the ongoing rights auction process if the expected bidding numbers are not met. This suggests that the BCCI aims to secure bids that exceed a certain threshold, and if those expectations are not met, they may opt to halt the auction.

Elara Capital’s projections highlight the potential for higher premium bids over the base prices, particularly for digital rights. They expect the premium for TV rights to be around 30-40% over the base price, while the premium for digital rights could be much higher, ranging from 80-90%. This could lead to a combined per-match price of around Rs 80 crore for both TV and digital rights.

The justification for these higher premiums lies in the assumption that platforms would have the opportunity to break even or become profitable at these price levels. The analysis takes into consideration the potential growth of India’s advertising environment, driven by profitable new-age and commerce companies. Additionally, factors such as the cooling off of inflationary pressures and the emergence of technologies like Meta, Web 3.0, and 5G are expected to contribute to a conducive advertising landscape.

The reference to Star Sports India outbidding Reliance and Sony in 2018 to win BCCI media rights for the period of 2018 to 2023 serves as a historical context. This past successful auction underscores the competitive nature of the bidding process for cricket broadcasting rights.

In summary, the ongoing auction for the BCCI’s media rights for the next five-year cycle is subject to achieving certain expected premium bids over the base prices. If the anticipated numbers are not met, there is a possibility that the BCCI might cancel the auction. The projected premium bids are influenced by the potential for profitability in the advertising environment, and they aim to strike a balance between securing revenue and providing opportunities for platforms to thrive.

Disney Star, a prominent media company, possesses a diverse portfolio of sports channels available in both standard definition (SD) and high definition (HD) formats. The company offers commentary in various regional languages and holds the rights to broadcast and stream matches on both television and its digital platform for all International Cricket Council (ICC) events. It also has rights for the Asia Cup until the present year. Disney Star’s established presence, advanced technology, and extensive experience have made it a preferred choice for sports media rights.

Several major media companies, including Disney Star, Reliance-owned Viacom 18, and potentially Sony (which is in the process of merging with Zee), are likely to actively compete to secure the media rights for India’s bilateral cricket matches to be played within the country for the period spanning 2023 to 2028. These bilateral matches involving the Indian cricket team are highly sought-after assets due to their substantial viewership and revenue potential.

It’s important to note that Disney Star and Reliance Jio have already made significant financial investments in cricket broadcasting rights. They have collectively spent an impressive sum of Rs 48,390 crore for the rights to broadcast and digitally cover the Indian Premier League (IPL), a popular domestic cricket tournament. This marked the first time that the Board of Control for Cricket in India (BCCI) split the rights for television and digital coverage of the IPL.

Given the competitive landscape and the strategic importance of securing cricket media rights, major media players are likely to engage in fierce bidding to acquire the rights for India’s bilateral matches. This competitive environment underscores the economic significance of cricket as a content offering and reflects the growing demand for high-quality sports content in the media industry.

Elara Capital’s analysis highlights several factors contributing to the sharp growth in media rights prices for the Indian Premier League (IPL), as well as the differences in the approach being taken by the Board of Control for Cricket in India (BCCI) for the upcoming rights auction for India’s bilateral cricket matches.

The significant growth in IPL media rights pricing can be attributed to:

1. **Higher Inflation in Cricket Pricing**: Cricket content has experienced higher inflation in pricing compared to other genres, with a growth rate of around 0.8 times (CAGR of 12-13%) over a five-year period. This indicates the strong demand and value that cricket content commands in the media market.

2. **Digital Bidding by Global OTT Giants**: The participation of global over-the-top (OTT) giants and other digital platforms in the bidding process for cricket rights has driven up prices. These platforms are keen to secure premium sports content to attract and retain subscribers.

3. **Scarcity Premium and Digital Expansion**: Cricket holds significant strategic importance for digital platforms looking to scale up their offerings. The scarcity of premium cricket content makes it a valuable asset for platforms seeking to increase their user base and engagement.

However, for the upcoming rights auction for India’s bilateral cricket matches, Elara Capital notes a different approach by the BCCI:

1. **Lower Base Price and Attracting Interest**: The BCCI has set the base price for the rights 25% lower than the price of the previous cycle. This suggests that the BCCI is looking to attract interest from various platforms by offering a more competitive starting point for bidding.

2. **Potential Factors Impacting Premium**: Elara Capital suggests that the premium in these media rights could be lower than in the previous cycle due to a combination of factors:
a. Fewer platforms bidding: A reduced number of platforms participating in the bidding process could potentially lead to less competitive pressure on the premium bids.
b. Curtailed ad spend of new age and commerce firms: Economic conditions and budget constraints may influence the advertising expenditure of certain companies, impacting their willingness to bid aggressively.
c. IPL revenue decline: A projected decline of 20-25% YoY in IPL revenue for the year could influence the willingness of platforms to bid higher.

In conclusion, the factors driving the growth in IPL media rights prices and the BCCI’s strategic approach for the upcoming bilateral cricket matches rights auction highlight the complex dynamics of media rights in the sports industry. While cricket remains a highly valued content category, market conditions, platform participation, and economic factors can all play a role in shaping the bidding and pricing outcomes.

The decision-making process for media companies regarding bidding for the Board of Control for Cricket in India (BCCI) media rights appears to be influenced by various factors, including existing commitments, market dynamics, and potential challenges. Industry experts have indicated that media companies might adopt a cautious approach due to their prior commitments to other significant sports properties, such as the Indian Premier League (IPL) and International Cricket Council (ICC) rights, which have already absorbed a substantial investment of around $9 billion.

Several considerations are shaping media companies’ bidding strategies:

1. **Financial Commitments and Market Dynamics**: Media companies have already allocated substantial resources toward acquiring IPL and ICC rights. This financial commitment, combined with factors like market competition and evolving consumer preferences, may influence their decision-making when bidding for BCCI media rights.

2. **Complex Corporate Situations**: Some media companies might be dealing with ongoing issues such as potential mergers, changes in ownership stakes, or significant investments to expand their market share. These considerations could impact their readiness to allocate additional resources to secure BCCI media rights.

Regarding the possibility of tech giants Amazon and Google bidding for the digital rights, there seems to be skepticism among industry insiders. While reports suggest that the BCCI might be seeking interest from these tech giants, insiders have expressed doubts about the likelihood of such bids materializing.

For instance, Amazon’s non-participation in the IPL bidding was highlighted as an indicator that the company might not prioritize cricket rights. Additionally, market insiders noted that the large financial commitments and the competitive landscape might make it less attractive for Amazon and Google to pursue these rights.

In summary, the complexities of existing financial commitments, corporate situations, and market dynamics are shaping media companies’ approaches to bidding for BCCI media rights. While the BCCI might be exploring interest from tech giants, industry insiders express doubts about the feasibility of such bids based on their historical behaviors and the current market environment.