Will IPL media rights bid surpass the Rs 50,000-crore magic figure?

As expected, the Indian Premier League (IPL) media rights e-auction has set new benchmarks in the sports broadcasting business not just in India but also globally. On the first day of the e-auction, the IPL media rights bid reached Rs 43,050 crore (Rs 23,370 crore for TV & Rs 19,680 crore for digital) for the TV and digital rights for the Indian sub-continent. This is an increase of more than 2.6 times over Rs 16,347 crore paid by Star India for the 2018-22 media rights cycle. The media rights value is close to hitting the magic figure of Rs 50,000 crore. The growth in media rights value is driven by digital rights even as TV is holding strong.

On a per-match basis, the bids for TV and digital rights have cumulatively touched Rs 105 crore which is more than double of Rs 54.5 crore per match in the previous cycle. This includes Rs 57 crore per match bid for TV rights and Rs 48 crore per match bid for digital rights. The TV rights value has increased by 16.32% on a reserve price of Rs 49 crore while the digital rights have seen a 45.45% appreciation on a reserve price of Rs 33 crore.

An unnamed BCCI functionary has been quoted as saying by reports that the media rights value might touch the magic figure of Rs 50,000 crore as the bidding for Package C and D is yet to begin. "We were expecting fantastic digital bids and with the fight for Group A and B still on, the magic figure of Rs 50,000 crore could well be touched. For Package C and D, one can have a rough estimate that another Rs 5500 crore would be added, if these first two packages stop at Rs 45,000 crore," the functionary said.

Analysts and media experts believe that the IPL media rights value will easily cross Rs 50,000 crore if the current bidding intensity continues. The key players in the e-auction are Disney Star India, Reliance-backed Viacom18, Sony Pictures Networks India (SPNI), and Zee Entertainment Enterprises Limited (ZEEL).

According to D And P India Advisory Managing Partner N Santosh, the first day of the e-auction has proven the fact that IPL is one of the fastest-growing sports properties globally. He also stated that the IPL is next only to NFL in terms of per match value. That said, he added that the IPL has a long way to go since it only runs for two months unlike some of the other global leagues like the NFL, NBA, and EPL.

"For a league which is only 15 years old, this is something which is beyond awesome. But IPL still has a long way to go as it's just two months in a year property compared to most other global leagues which happen throughout the year. IPL is still not tested against viewership fatigue, etc. IPL is 70 odd game league compared to EPL which is almost 400 games per league. Hence, IPL, even though is 2nd only to NFL on a per match basis, is still significantly behind at the overall league level, but is doing all the right things and moving in the right direction," he averred.

A veteran sports business observer said that the IPL is on course to surpass the Rs 50,000-crore mark. "Everyone was expecting the numbers to be close to Rs 50,000 crore and it's heading in that direction. It's not at all surprising. In fact, it's a vindication of the industry's faith in IPL as a media property. The absence of tech giants has not had an impact on the e-auction," the observer said. Earlier, Amazon and Google had pulled out of the IPL media rights race.

Elara Capital SVP Karan Taurani believes that the value for TV and digital rights might touch Rs 25,000 crore and Rs 22,000 crore respectively. In a report, Elara Capital had estimated that the IPL media rights value may soar 3-4 times to Rs 50,000 to 60,000 crore.

Taurani further stated that the digital rights value will not surpass TV as the latter is still a strong monetisation platform. "We believe that on the per match cost basis, the digital segment will come at par with TV at best and don’t see it moving beyond TV, as TV still has a lot of large FMCG advertisers and digital despite strong growth has concerns on monetisation and SVOD, as India is a price-sensitive market with tepid ARPUs," he noted.

He expects Package C and D to command a premium of almost 40-45% over the base price. "The total value of rights will breach Rs 50,000 crore in line with our expectation," he averred.

The cumulative five-year base price for the two packages is Rs 30,340 crore. While the base price for Package A (Broadcast rights for the Indian sub-continent) is Rs 18,130 crore, Package B (Digital rights for the Indian sub-continent) carries a base price of Rs 12,210 crore.

The IPL media rights e-auction is seeing a fierce four-way battle among Disney Star India, Sony Pictures Networks India (SPNI), Zee Entertainment Enterprises Limited (ZEEL), and Reliance-backed Viacom18.

D And P India Advisory's Santosh, who was expecting the winning bids to not be significantly higher than the base price, said that the current leading bids are at a reasonable premium to the base price. "We believe that the final bids might be slightly more than the current bids, but not significantly higher," he noted.

While the bidding war for TV and digital rights works well in the BCCI's favour, Santosh believes that the IPL media rights might end up becoming a winner's curse due to the staggering numbers involved.

"The rights value beyond these levels might result in significant negative cash flows to the broadcasters and the ROI might not be anything material if not negative. What we have seen with some new-age digital start-ups which focus on growth over profitability and burn cash with the hope of making a supernormal profit in the future could also be the case here. Media companies looking at making investments in acquiring content could be looking at growth over profitability," he elaborated.

Santosh said that the BCCI and franchisees will have the last laugh as all this would only mean that the central pool would see a cash inflow of more than US$1 billion per annum. This, he said, is expected to push the IPL League valuation significantly higher. "We were anticipating circa 20% jump in value, but this could be much higher with the current bids."