Broadcasters look beyond TV screens to be part of Rs.48,000 million + sports business in India
Broadcasters have gone from investing in acquiring the broadcast rights of sports leagues to now also buying stake into these leagues
One of the biggest businesses for TV broadcasters is sports. Advertising on-air revenues from sports had increased to Rs.25,180 million in 2014 from Rs.22,500 million in 2013 according to GroupM ESP – Sportz Power ‘India Sports Sponsorship Report 2015’. While the total revenue from the sports business accounts for Rs.48,069 million in 2014 which was a 10% increase from the previous year Rs.43,725 million says the report. This includes on-ground sponsorships, on-air sponsorships, team sponsorships, franchise fees and endorsements.
The advertising revenue on-air from one of the biggest sporting tournament in India the IPL brings in revenues over Rs.1,000 crore. Though brands pay top dollars for cricket in India, there have been some inroads in other sports recently as people realise the big revenue potential in these domestic leagues. According to the GroupM ESP report a large chuck of revenue to the tune of Rs.4.344 billion had come through revenue accruals from the new leagues started. TV broadcasters have gone from investing in acquiring the broadcast rights for these leagues to now also buying stake into these leagues, thereby becoming part owners. TV broadcasters today are even exploring the idea of starting a sports league of their own.
Star India has taken this business model very seriously and is now part owner in two sports leagues i.e. the Indian Super League (ISL) and the Pro Kabaddi League (PKL). Star India acquired 35% stake in ISL for Rs.2,000 crore (Rs.20 billion) and partnered with the other two stake holders IMG and Reliance. The broadcaster also spent close to Rs.100 crore in ISL for the marketing and promotion. Recently Star India had acquired 74% stake in Marshal Sports which is co-promoted by Anand Mahindra and owns the PKL. The value of this deal is not yet known. Both these tournaments during their first season had received a fairly good response from viewers, prompting second editions of these leagues.
Star India in 2013 had announced that they had committed more than Rs.20,000 crore to the sports business and is expected to invest another $2 billion over the next five years. While some of this would be invested in terms of acquiring TV rights, the others have gone into buying stakes into the league.
While Star might look to become owners through the stake acquisition route, another media company Essel Group (ZEEL), has decided to even start a cricket league of their own. This is not the first attempt of Dr. Subhash Chandra’s Essel Group as they were one of the ones to start the now defunct Indian Cricket League (ICL) which had in essence given birth to the IPL. However, due to pressure from the BCCI after the launch of the IPL, the league had to shut down. This has however not stopped them as they once again plan to start a T20 league which is expected to rival the established IPL. There are some unsubstantiated media reports that league is looking to attract the likes of top players such as David Warner and Michael Clarke for offers of $50 million. The league is expected to have 12 teams although the time frame of the league has not yet been decided.
Sports bodies such as the BCCI and other earn a huge amount of revenues selling the rights not only for broadcast but also through on-ground sponsorship revenues, franchise fees and also digital rights separately. For instance, for sport in India in 2014 had also seen an increase in sponsorship on-ground sponsorship and franchise fee revenues. On-ground sponsorship had increased to Rs.7,948 million in 2014 from Rs.7,568 million in 2013. Franchise fees had increased to Rs.6,755 million in 2014 from Rs.5,508 crore in 2013 says the report. However, the endorsements had reduced over the year to Rs.3,278 million in 2014 from Rs.3,822 million in 2013 the reason for this is the fewer amount of India matches played in the country.
BCCI makes a major chunk of the earnings from sports as it is not only the biggest sports body in the country but around the world. While MSM had to shell out Rs.8200 crore for the rights of IPL for a period of 10 years, Star India had paid Rs.3,851 crore for the six year deal period for 96 matches of India from the period of July 2012-March 2018. The board also got revenue from the acquisition of the digital rights of IPL which Star India acquired through its subsidiary Novi Digital Entertainment for Rs.302 crore for three seasons. Star also pays the board an additional Rs.1.92 crore per match for the India team jersey sponsorship from 2014 to 2017. Apart from this are the ground sponsorship revenues from brand sponsorship for the matches played in India also bring in big revenues for the BCCI. Pepsi for instance has committed Rs.800 million per year for the title sponsorship rights of IPL. There are also associate sponsors such as Yes Bank and Vodafone that have spent big bucks for sponsorship on IPL.
When it comes to smaller leagues such as the ISL, the league had received close to Rs.500 million as central sponsorship revenues. This included Hero MotoCorp paying Rs.180 million per year for title sponsorship.
This shows that there is so much more revenues to be earned even from smaller leagues. A reason why media companies such as Star India and Essel Group look at growing the sports business beyond earning revenues through television. We can expect to see more stake acquisitions of sports leagues as well as the initiation of more sports leagues from broadcasters this year.
