IPL rights auction to make big money!!!

The most-awaited IPL rights for 2023-27 concluded, fetching Rs.48.390 crore to the BCCI. The winning bid total amount was 3 times last cycle's cumulative winning bid of Rs.16347.5 crore. 

Disney+ HotStar, which holds global IPL media rights till 2022, retained the television rights for the Indian sub-continent in Package A with a total payout of Rs. 23575 crore

Viacom18 won digital rights for India in Package B. Viacom18 also won Package C comprising non-exclusive digital media rights to 18 matches. In Package D, which includes TV and digital rights for the rest of the world, Viacom18 got Australia, South Africa, and the UK. Viacom18 payout stood at Rs.23757.5 crore. Times Internet won the Middle-East and North Africa (MENA) region and the US TV and digital rights with a payout of Rs.1058 crore.

Disney HotStar's bid looks more like a bet to maintain its TV sports broadcasting leadership than as a pure economic gain. Various media reports peg IPL 2022 TV revenues at Rs.3700-3800 crore, with ads being 80% of the mix. At this base, Star would need at least 12% ad revenues CAGR over the next 5 years coupled with 5% subscription revenues CAGR over the same period, to simply break even the bid cost and production expenses. Most importantly, the weakening of the TV viewership of the IPL 2022 season saw a decline in viewership by almost 30%, making the ability to scale up ad rates as well as subscriptions will be a challenge ahead. Another thing to look at will be how the government’s guidelines to curb surrogate advertisement of alcohol and online betting, impact overall ad volume.

Viacom 18 bid for digital rights ought to be seen in the light of the relative weak positioning of Voot in the OTT space, so far, and the available historical anecdote of Hotstar in India riding on IPL, which has now 50 million+ paid subscribers and forms more than 36% of total Disney+ global subscriber base of 137.7 million. In contrast, Voot Select paid subscription base had hit 1 paid million subscriber base in FY21. Thus, the scalability option is huge with IPL digital rights exclusivity and also given the strong distribution landscape of its group company Jio’s 410 million+ wireless and broadband subscribers. Furthermore, interactive features on digital platforms also provide a higher potential for monetization. Nonetheless, profitability may still be a long shot, as 2022 digital IPL revenues (subscription+ advertisement) have been pegged at Rs. 2200-2400 crore by various media reports. Thus, at such as base it warrants 25%+ CAGR for the next 5 years, just to break even.
 

Zee-Sony's post-auction comments suggest that they have gone for fiscal prudence. However, with a vision to scale up sports offerings, it is expected they to bid for ICC and BCCI rights when they come for renewals in the next 2 years. Meanwhile, in the near term, they are expected to build an OTT strategy on entertainment (series/movies) and regional slate. Nonetheless, not being able to win may have resulted in avoiding the possible “winners curses” which seems likely as of now.

The key winner in the overall bid process would be BCCI and the franchisees which stand to gain higher annual revenues. Note that out of the central pool, BCCI pays 50% of rights money to franchisees (including 5% as prize money). Thus, this higher bid will likely result in an incremental Rs. 250- 300 crore of annual revenues for each team from FY24 onwards, including Sunrisers Hyderabad, owned by Sun TV. The bottom line economics will be determined by how the cap on players’ salaries (currently at Rs. 80 crores) and other expenses change for the franchise, given the higher revenue availability.