Understanding the battle for IPL media rights

Disney Star, Viacom18, Zee-Sony combine, Amazon Prime Video, Google and Dream11 are all vying for IPL 2023-27 media rights.

The broadcast rights auction of the Indian Premier League (IPL) is a high-octane drama that’s about to unfold in a couple of weeks. The questions on everyone’s minds are: will a cost of Rs 100 crore or more per match be tenable for broadcasters? Will the winning bidder even recoup its investment? Or, will this end up as a classic case of the winning bidder driving up the price of the media property in an attempt to secure IPL 2023-27 rights?

The incumbent, Star India, acquired IPL media rights at Rs 16,348 crore for the 2018-22 period. For the 2023-27 period, the Board of Control for Cricket in India (BCCI) has set the base price at Rs 32,890 crore.

Globally, IPL media rights are the fourth highest after the National Football League (NFL), English Premier League (EPL), and Major League Baseball (MLB). In the current cycle, Star India pays over Rs 54 crore per match to the BCCI. The base price for TV rights set by BCCI, is Rs 49 crore per match, while that for digital rights is Rs 33 crore per match.

“As per our analysis, the final price could settle around Rs 100 crore per match,” says Santosh N, managing partner, D and P Advisory (an international market advisory that studies IPL’s brand valuation).

The appeal of IPL

After the BCCI raised Rs 12,725 crore from the sale of two new teams in 2021, its president Sourav Ganguly estimated that the board could fetch upwards of Rs 40,000 crore from the sale of IPL media rights. Industry executives suspect that the bidding war will push the number closer to Rs 50,000 crore or more - an extravagant price for the property which will, in turn, drive up advertising rates.

A 10-second IPL 2022 ad spot cost brands about Rs 14 lakh on average, up from Rs 10 lakh in 2018. The question is whether the advertisers would be willing to pay double the current rate for a 10-second spot. According to Jehil Thakkar, partner, Deloitte India, a 10-15 per cent hike over the previous season’s ad rates, could be palatable to the advertisers.

Brands belonging to established categories like FMCG and smartphone brands, are already sitting out and giving IPL a miss. The marketing head of a leading snacking brand says, “Advertisers who have already built a reputation among customers, are not receiving the kind of returns that justify crores of expenditure over a property like IPL.”

It is mainly startup brands that want to grow rapidly by acquiring customers who are using IPL as an advertising vehicle. “Consumer tech brands are the top advertisers on IPL because they want to reach the vast majority of those who are not transacting on their platforms,” observes Rammohan Sundaram, country head and managing partner, DDB Mudra Group.

One advertising sales executive, who does not want to be named, remarks that if a company wants to go for an IPO, IPL has become a default choice.

With funding winter setting in for startups, easy money that was being burnt by these consumer tech brands, is drying up. Santosh cautions that if recessionary trends last long, then ad rates will be forced into a correction.

Disney+ Hotstar has become a favoured destination for brands that want to leverage IPL, but can’t spend on television. “In the previous IPL editions, we had to convince brands to invest on the OTT platform for incremental reach. Now, many brands opt to advertise on the IPL via Disney+ Hotstar alone,” says Nupur Shah, AVP and digital lead - West & South, PHD India.

Even though brands can buy ads for as low as Rs 20 lakh, media buyers typically recommend an advertising investment of Rs 20-25 crore to derive results from a campaign that runs on Disney+ Hotstar.

Streaming all the way

In 2017, Facebook launched a Rs 3,900 crore bid for just the digital rights of IPL. It was clear that grabbing the digital media rights would define who would be the winner of India’s video streaming market. Over the last five years, Disney+ Hotstar claimed this pole position with IPL in its kitty.

As of June 2020, Disney+ Hotstar had 8.7 million paying subscribers (mostly from India) and by March 2022, it had 50 million. As per Disney’s Q2 CY22 earnings call, more than 50 per cent of the eight million new paying subscribers that Disney+ added in the quarter, are thanks to IPL, which kicked off towards the end of the quarter.

The gap between television and OTT sponsorship rates, is narrowing, given the reach that IPL has garnered over Disney+ Hotstar. Sample this: the outlay for a co-presenting sponsor on TV was Rs 211 crore for a reach of 400 million, while the same for Disney+ Hotstar, with a reach of 280-300 million, was Rs 110 crore for this IPL season.

In comparison, a co-presenting sponsorship for IPL on Hotstar in 2017 was Rs 25 crore, something that seemed outrageous at that point. Today, associate sponsorship comes at Rs 25 crore.

The deep and wide reach of digital mediums, has also benefited IPL teams. This year, Delhi Capitals secured an exclusive sponsor for DC TV and has a partnership with the lock screen service Glance. Divyanshu Singh, head sales and marketing, JSW Sports (the company that owns Delhi Capitals), says that sport, as a content marketing platform, has become exceedingly popular.

“In 2021 we completely monetised our video content platform DC TV. We sold the rights to the platform at close to $1 million per year in 2021 and 2022.” In 2022, investment services platform Octa became the principal sponsor of Delhi Capitals.

Bidding war

The Sony-Zee combine, Viacom18 backed by Uday Shankar’s Bodhi Tree Systems, YouTube, Amazon Prime Video and fantasy gaming platform Dream11, will be bidding for the media rights.

“If a company has a strategic view to the bid, then the property economics won’t matter,” says Thakkar. When Star India won the IPL bid, it was also seen as a strategic decision by the broadcaster, which was soon after bought by Disney.

Industry executives expect the digital rights, in particular, to be hotly-contested. BCCI split the TV and digital categories to maximise gains. “However, the odds are skewed in favour of broadcasters, with streaming platforms to win a consolidated bid just like Star India did,” says a media company insider. This is because the Category I (TV) winning bidder can challenge the highest bidder in Category II (digital) to gain digital rights.

In the meantime, incumbent Disney+ Hotstar is showcasing itself as a platform that is more than just cricket. Constantinos Papavassilopoulos, principal analyst, TV & online video, OMDIA (an international research and advisory group that focuses on the technology sector), points out that Disney+ Hotstar has been increasingly promoting its non-sports content portfolio over the last one year.

The platform said it will add 100 new originals to its India content pipeline. “These are very important developments. Until late 2020 and early 2021, Disney+ Hotstar did not produce much original content for India,” Papavassilopoulos says.