Informist, Wednesday, Mar 22, 2023

By Vivek Kumar

MUMBAI – India's mega cricket festival, Indian Premier League, which is popular for entertaining fans with nail-biting matches, is also driving a high-stakes battle among broadcasters in the backstage for viewership.

It is for the first time in the history of the 15-year-old tournament that television broadcasting rights and digital streaming rights have been split between two different companies.

Accomplishing something of a coup, Reliance Industries-backed Viacom18 seized the exclusive digital streaming rights for the league from incumbent Disney Star by bidding a whopping 238 bln rupees for five years. This is even higher than the 236 bln rupees paid by Disney Star to retain television broadcast rights.

This also means that, for the first time ever, pay television will face competition from a free-to-view platform as Viacom18 plans to stream IPL matches on JioCinema.

NEW RIVAL

IPL, as a television property, has proven to be a dependable source of revenue for Disney Star over the last five years, while the arrival of Viacom18 on the scene will introduce an element of uncertainty into the equation.

Last year, the property is estimated to have generated advertising revenue of 50 bln rupees for Star, which controlled both the digital and broadcasting rights.

Sports as a genre has been consumed mostly on television by families and friends who prefer watching the matches together, but digital platforms are growing at an enormous pace. This could pose a serious threat to the whole pay television industry in India, particularly as news and sports remain the two genres where immediacy continues to be prized.

"If you are offering it for free on over-the-top platform, it means customers will go to OTT, and it is negative for the whole pay television industry because sports is one of the key drivers for pay television subscription," said an India equity research head at a top-tier global investment bank.

The key question on everybody's mind, however, is just how much damage can free streaming inflict upon the television broadcaster.

IPL is expected to garner a record 550 mln viewers this year between broadcasting and digital space, a media analyst at a Mumbai-based brokerage firm said. This would be around 29% higher than last year's 426 mln viewers.

However, he added, most of them would prefer the larger screen. "If you want to watch one match on low streaming quality, it would require 2.0-2.5 GB of data.... You might see some increase in recharges, but a lot of people might not do that and would instead watch on TV," he said.

Karan Taurani, senior vice-president and research analyst for media sector at Elara Capital, believes that there could be 5-8% loss in terms of reach for Disney Star because of free digital streaming by Viacom18. But given that Disney Star will broadcast last 12 matches on free-to-air channels, the loss in viewership may not be as much.

"While you will find a lot of incremental consumption happening on digital in a very big way, I don't see viewership moving away from TV. Viewership movement from TV will only be led by cord cutting households and maybe smart TVs," Taurani said.

MONETISATION POSSIBLE?

The high price paid for IPL rights begs the question of whether the two media companies will be able to generate a proportionate return from their investments.

"Honestly, everyone is right now playing in the blind. Because it is the first time they are doing all this (free streaming)," the Mumbai-based brokerage firm's analyst said. "For advertisers, it becomes a case of FOMO (fear of missing out) as well because if they do not go ahead and advertise, and others do, it will be a big miss for them," he added.

Eager to maximise the advertising inventory, Disney Star has already announced that it will broadcast the last 12 matches of the tournament on its free-to-air channels. This will help it expand the target audience substantially, compared to keeping the matches limited to its high-priced sports channels.

Still, valuation services provider D and P Advisory believes that monetisation of these high-cost rights could be a tough task for broadcasters. "They would be facing the twin-challenge of higher advertisement rates and an audience divided between digital & television formats," it said in a report.

Nevertheless, Viacom18's move to stream IPL matches for free is definitely an appealing prospect for advertisers, analysts believe.

In 2022, IPL's total advertising revenue was around 50 bln rupees. Of this, only 10-20% was from digital streaming platform. However, Viacom18's share in the total advertisement pie this year is likely to be higher.

Santosh believes overall advertisement revenues in 2023 might not be much higher than last year.

"When both OTT and linear rights are with the same broadcaster, his bargaining power is much higher with advertisers. Now, there will be competition between Viacom18 and Disney Star, and the advertiser would be in a better position to negotiate because he has two broadcasters looking to onboard him...

"Because last time both rights were with one player, and if an advertiser (was to) come and say give me inventory in linear and OTT, maybe Star would have had an internal mechanism to apportion between OTT and linear. But Jio does not have that obligation. It will go aggressively and sell," he pointed out.

However, there are some challenges when it comes to advertising on digital streaming this time as the content is free. The prospect might appeal to advertisers who want to promote mass-produced goods, but premium brands may not feel the same. This is especially likely to be the case if the advertisement rates are very high. The purchasing power of viewers on free platforms may be low, feel some experts.

Brokerage firm CLSA had said that digital advertising revenue of IPL has to grow at a compounded annual rate of 57% to equate to Viacom18's bid price. Without subscription income for at least the first year, the challenge to break even will only get more daunting for Viacom18.

Moreover, the advertisement market is yet to recover from the slowdown caused by lower marketing spend by fast-moving consumer goods and new-age digital companies. While IPL might provide a perfect opportunity for them to up their marketing, it is unlikely that there would be incremental advertisement spends, analysts believe.

"Typically, companies have budgets set for advertising. It'll probably just (be) that if you advertise here, you'll not advertise elsewhere," the analyst quoted above said.

TELECOM PLAY

However, unlike Disney Star, Reliance Industries has an additional, entirely novel and unique method of generating returns from its investment in the property. This is because it also owns India's largest telecommunications service provider, Reliance Jio Infocomm Ltd.

Even if the group doesn't recover its investments directly through advertising or subscription charges, the provision of free streaming on JioCinema is likely to lead to an increase in data consumption on its network, in turn leading to higher revenue for its telecom unit.

Moreover, while IPL is currently free for all telecom subscribers, Viacom18 does have an option to make it exclusive for Jio users at some point in time.

Also, Jio may ask Airtel--India's second-largest telecom operator--and other telecom players to pay a lump sum amount so that their subscribers can also enjoy IPL matches for free. This could also be one of the business models that the conglomerate can implement.

"There might be synergies which may be very difficult to quantify. We might say that oh you paid so much and your advertisement revenue is nothing and you are losing. But what if they are actually getting significant benefit on the telecom side," Santosh said.  End

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.

Informist, Wednesday, Mar 22, 2023

By Vivek Kumar

MUMBAI – India's mega cricket festival, Indian Premier League, which is popular for entertaining fans with nail-biting matches, is also driving a high-stakes battle among broadcasters in the backstage for viewership.

It is for the first time in the history of the 15-year-old tournament that television broadcasting rights and digital streaming rights have been split between two different companies.

Accomplishing something of a coup, Reliance Industries-backed Viacom18 seized the exclusive digital streaming rights for the league from incumbent Disney Star by bidding a whopping 238 bln rupees for five years. This is even higher than the 236 bln rupees paid by Disney Star to retain television broadcast rights.

This also means that, for the first time ever, pay television will face competition from a free-to-view platform as Viacom18 plans to stream IPL matches on JioCinema.

NEW RIVAL

IPL, as a television property, has proven to be a dependable source of revenue for Disney Star over the last five years, while the arrival of Viacom18 on the scene will introduce an element of uncertainty into the equation.

Last year, the property is estimated to have generated advertising revenue of 50 bln rupees for Star, which controlled both the digital and broadcasting rights.

Sports as a genre has been consumed mostly on television by families and friends who prefer watching the matches together, but digital platforms are growing at an enormous pace. This could pose a serious threat to the whole pay television industry in India, particularly as news and sports remain the two genres where immediacy continues to be prized.

"If you are offering it for free on over-the-top platform, it means customers will go to OTT, and it is negative for the whole pay television industry because sports is one of the key drivers for pay television subscription," said an India equity research head at a top-tier global investment bank.

The key question on everybody's mind, however, is just how much damage can free streaming inflict upon the television broadcaster.

IPL is expected to garner a record 550 mln viewers this year between broadcasting and digital space, a media analyst at a Mumbai-based brokerage firm said. This would be around 29% higher than last year's 426 mln viewers.

However, he added, most of them would prefer the larger screen. "If you want to watch one match on low streaming quality, it would require 2.0-2.5 GB of data.... You might see some increase in recharges, but a lot of people might not do that and would instead watch on TV," he said.

Karan Taurani, senior vice-president and research analyst for media sector at Elara Capital, believes that there could be 5-8% loss in terms of reach for Disney Star because of free digital streaming by Viacom18. But given that Disney Star will broadcast last 12 matches on free-to-air channels, the loss in viewership may not be as much.

"While you will find a lot of incremental consumption happening on digital in a very big way, I don't see viewership moving away from TV. Viewership movement from TV will only be led by cord cutting households and maybe smart TVs," Taurani said.

MONETISATION POSSIBLE?

The high price paid for IPL rights begs the question of whether the two media companies will be able to generate a proportionate return from their investments.

"Honestly, everyone is right now playing in the blind. Because it is the first time they are doing all this (free streaming)," the Mumbai-based brokerage firm's analyst said. "For advertisers, it becomes a case of FOMO (fear of missing out) as well because if they do not go ahead and advertise, and others do, it will be a big miss for them," he added.

Eager to maximise the advertising inventory, Disney Star has already announced that it will broadcast the last 12 matches of the tournament on its free-to-air channels. This will help it expand the target audience substantially, compared to keeping the matches limited to its high-priced sports channels.

Still, valuation services provider D and P Advisory believes that monetisation of these high-cost rights could be a tough task for broadcasters. "They would be facing the twin-challenge of higher advertisement rates and an audience divided between digital & television formats," it said in a report.

Nevertheless, Viacom18's move to stream IPL matches for free is definitely an appealing prospect for advertisers, analysts believe.

In 2022, IPL's total advertising revenue was around 50 bln rupees. Of this, only 10-20% was from digital streaming platform. However, Viacom18's share in the total advertisement pie this year is likely to be higher.

Santosh believes overall advertisement revenues in 2023 might not be much higher than last year.

"When both OTT and linear rights are with the same broadcaster, his bargaining power is much higher with advertisers. Now, there will be competition between Viacom18 and Disney Star, and the advertiser would be in a better position to negotiate because he has two broadcasters looking to onboard him...

"Because last time both rights were with one player, and if an advertiser (was to) come and say give me inventory in linear and OTT, maybe Star would have had an internal mechanism to apportion between OTT and linear. But Jio does not have that obligation. It will go aggressively and sell," he pointed out.

However, there are some challenges when it comes to advertising on digital streaming this time as the content is free. The prospect might appeal to advertisers who want to promote mass-produced goods, but premium brands may not feel the same. This is especially likely to be the case if the advertisement rates are very high. The purchasing power of viewers on free platforms may be low, feel some experts.

Brokerage firm CLSA had said that digital advertising revenue of IPL has to grow at a compounded annual rate of 57% to equate to Viacom18's bid price. Without subscription income for at least the first year, the challenge to break even will only get more daunting for Viacom18.

Moreover, the advertisement market is yet to recover from the slowdown caused by lower marketing spend by fast-moving consumer goods and new-age digital companies. While IPL might provide a perfect opportunity for them to up their marketing, it is unlikely that there would be incremental advertisement spends, analysts believe.

"Typically, companies have budgets set for advertising. It'll probably just (be) that if you advertise here, you'll not advertise elsewhere," the analyst quoted above said.

TELECOM PLAY

However, unlike Disney Star, Reliance Industries has an additional, entirely novel and unique method of generating returns from its investment in the property. This is because it also owns India's largest telecommunications service provider, Reliance Jio Infocomm Ltd.

Even if the group doesn't recover its investments directly through advertising or subscription charges, the provision of free streaming on JioCinema is likely to lead to an increase in data consumption on its network, in turn leading to higher revenue for its telecom unit.

Moreover, while IPL is currently free for all telecom subscribers, Viacom18 does have an option to make it exclusive for Jio users at some point in time.

Also, Jio may ask Airtel--India's second-largest telecom operator--and other telecom players to pay a lump sum amount so that their subscribers can also enjoy IPL matches for free. This could also be one of the business models that the conglomerate can implement.

"There might be synergies which may be very difficult to quantify. We might say that oh you paid so much and your advertisement revenue is nothing and you are losing. But what if they are actually getting significant benefit on the telecom side," Santosh said.  End

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.