Media Rights: Will e-auction raise IPL's value?

With the Board of Control for Cricket in India (BCCI) weighing in favour of the e-auction process for selling the Indian Premier League (IPL) media rights, experts believe that the value of the cash-rich league for the next five-year rights cycle is most likely to go through the roof since the competitive intensity will be stronger compared to a closed bidding process.

As per media reports, the BCCI is all set to come out with the tender for the IPL media rights in the second week of February and the e-auction will be conducted within 45 days from the date of floating the tender. The IPL media rights e-auction promises to be a tightly contested affair with Disney-owned Star India, Sony Pictures Networks India (SPNI) & Zee Entertainment, and Reliance-backed Viacom18 being the key contenders for the rights. The likely entry of Uday Shankar and James Murdoch in Viacom18 has added a new dimension to the battle for IPL media rights. E-commerce giant Amazon might also mount a bid either individually or in strategic partnership with a TV partner for the IPL media rights.

This is the second time the BCCI will conduct an e-auction to sell the media rights. In 2018, the cricket board had sold India cricket rights through e-auction. The property had fetched good value for the board due to a three-way fight between Star, Sony, and Reliance Jio. The BCCI media rights e-auction was conducted by mJunction, a joint venture (JV) between Steel Authority of India Limited (SAIL) and Tata Steel.

“BCCI broke new ground in 2018 by taking the technology route to discover market pricing and gained substantially. The transparent process was appreciated by bidders and helped in realising the best value for BCCI. We understand BCCI is considering the technology option for IPL media rights. BCCI has been at the forefront of bringing in change, and we welcome and applaud this move," said mJunction MD Vinaya Varma.

Triplecom Media iTap Founder and CEO Kunal Dasgupta believes that the IPL media rights value will likely hit Rs 40,000 crore due to open bidding via e-auction, increase in the number of matches due to addition of Ahmedabad and Lucknow teams and the desperation among the bidders to get IPL at any cost due to its strategic value for the overall media business.

An industry source, however, cautions that the increase in the number of matches might prove to be a dampener since the number of afternoon games will see an increase. The afternoon games generally have a lower viewership compared to the second matches that are played during the prime-time.

According to a veteran sports media executive, both e-auction and closed bidding have their pros and cons. He further stated that the e-auction will ensure that the key players will bid to their maximum capacity since the bid amount is out in the open. That said, the chances of getting a good value in closed bidding are also high since one of the players might bid an astounding amount to get the rights.

"In a closed bid, somebody may put in a crazy value since they know that they have only one chance, but in the e-auction, all the key players will keep fighting each other till they reach their absolute maximum limit and then somebody wins. In e-auction, nobody can be conservative. The bidders will not only have to put their best value but may even stretch their best value. In a multi-player bid, e-auction may work out very well, especially in a heavily competitive environment, it can go crazy," the executive said.

He also noted that the process of selling the media rights makes a lot of difference in getting a good value for a property. "If the previous IPL media rights sale had happened through e-auction, then who knows maybe Sony would have fought harder with Star. On the contrary, if the BCCI had done a sealed bid for India cricket rights with only Star and Sony in fray, the value might have been lower because both of them would have done their calculations and treaded cautiously," he noted.

The executive also feels that the BCCI is doing e-auction of IPL media rights not because of transparency but basically to ensure that there is competitiveness. "In a sealed bid, it is possible that a Star or a Sony or a Reliance will lose because they might have done wrong numbers. In e-auction, instead of you guessing a wrong number it gives you a scenario of fighting it out with each other as long as you want. That way, you can always say that 'ok, I can't go any further, and I accept defeat'," he stated.

According to a senior executive with a leading e-auction company, the most important factor in favour of e-auction is trust. He added that bidders will not mind bidding aggressively if they trust the process and the platform.

"In an e-auction, the chances of getting a higher price are much more than in a closed bid, especially in a competitive environment. Also, most bidders tend to bid conservatively in a closed bid particularly in a weak market. In a transparent process, the bidders are willing to put in extra money since they have trust in the system. Trust is the most important factor when it comes to e-auction. If buyers are sure that there is no foul play involved, they are far more confident about putting their best foot forward during the auction," he stated.

A veteran media executive with experience in the broadcasting sector feels that the e-auction will be a win-win for both BCCI and the bidders. "In closed bidding, everyone has a tentative number which is mostly based on gut feel and revenue projections. Bidders try to gauge what might be the highest bid and then try to bid closest to that number. Bidders also try to ensure that they don't overbid in a closed bidding scenario whereas in e-auction everyone is scared that somebody might play a spoilsport. It all depends on the desperation of the bidders," he noted.