Analysts break down IPL media rights for 2023-27 & what it means for the bid winners

It is finally the end to so many days of speculations and analyses. The media rights for the Indian Premier League, one of the most lucrative properties in the world of sports today, have been won by two leading players. While Disney-Star has retained the TV broadcasting rights for the IPL for Rs 23,500 crore, Viacom18 has bagged the digital rights for Rs 20,500. The e-auctions for IPL media rights for the 2023-27 period began on Sunday and spilled over to Monday with packages A and B of the deal being sold for a huge amount of Rs 44,075 crore. This is said to be the highest amount that the media rights of any cricket league has been auctioned for.

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The last-minute withdrawal by the Amazon from the bidding battle didn’t take away the lustre or excitement out of the IPL fever. The insane valuation means that the IPL has overtaken English Premier League (EPL) by the per-match-valuation metrics.

“This time, going by the present minimum base price that we have set, BCCI will get paid $12 million per IPL match. That’s a giant leap for Indian cricket on the world stage. We will be just behind NFL,” said BCCI Secretary Jay Shah.

The eye-popping numbers were along expected lines; first and foremost, the stakes were high with major players throwing their hats into the IPL ring, because, as rightly pointed out by Karan Taurani, Senior Vice President at Elara Capital, it has emerged as a “mega-growth opportunity for the stakeholders”.

“Cricket rules the Indian market with a stupendous 94% share in media rights vis-à-vis a mere 3%, globally. Cricket may continue to enjoy such sheer dominance in India, medium term, propped by large-lucrative properties such as the Indian Premiere League (IPL). Thus, expect IPL renewal to underpin media rights growth in India, medium term. On pricing, IPL per match is poised at a 70% discount to global averages, which may converge to 20-30%, led by IPL renewal in 2023-2027. Also, IPL media rights’ revenue CAGR at 10.4% is much higher than other global leagues’ (EPL, NFL, NBA) 8% CAGR since their inception. Thus, cricket, especially IPL, is approximating a trailblazer innings in India,” Taurani said in his analysis.

“The IPL auction pricing is in line with what was anticipated. This is great for cricket, IPL and BCCI,” remarked Uday Sodhi, Senior Partner and Co-founder, Kurate Digital Consulting.

Lloyd Mathias, Business Strategist and former senior marketer at HP Inc., Motorola and PepsiCo, pointed out, “BCCI is the world’s wealthiest cricket body on the back of its ability to sell broadcast rights. The IPL being one of its key properties the BCCI has capitalised on its audience by splitting the media rights into four segments – Domestic broadcasting rights; Rest of the world broadcasting rights; Digital rights; and Bespoke non-exclusive packages for special matches like the play offs.”

According to Mathias, this is a smart way to maximise revenue and get all global players on board – Disney-Star; Reliance-Viacom18; Sony-Zee.

Sodhi called it a great win for Disney, whose fortunes in India were tied to its IPL rights during these past years. “I am sure Disney Hotstar would have thought of a Plan B. However, this will impact their strategy significantly. With the HBO Max launch and IPL, Hotstar will need to rethink their content strategy. They will need to double down on local content creation and acquisition,” Sodhi added.

According to Taurani, on the TV/digital front, a break-even will happen only in the third year; as far as profitability is concerned, TV gross profit margin will peak at 12% in the fifth year, whereas digital gross margin will breach 35% in the fifth year.

According to Elara Capital analysis, cricket is among the most popular sports, not only in India, but also in the subcontinent. Conversely, globally, a handful of countries play cricket. “Thus, a huge opportunity exists for India to scale up the game, globally. Participation in events such as the Olympics will help Cricket be recognised internationally, with rising popularity,” says the analysis.

“A large-ticket property such as IPL is very important for any broadcaster so as to drive its digital strategy. To illustrate, one-third of Star’s revenue is IPL-led (TV + Digital), which reaffirms its importance. If Star wins IPL rights, this revenue contribution will augment to 40% as digital growth will accelerate. As per our estimates, 70% of Star India’s AVOD revenue is IPL-led, with SVOD revenue largely following suit too,” explained Taurani.

He further said, “We continue to believe that IPL leads to a big surge in various metrics such as monthly active users (MAU)/ daily active users (DAU) for any OTT platform. However, as IPL’s content cost will remain at a huge premium (Rs 100 billion annually), any broadcaster with such rights may be unable to break even until the fourth year (of the five-year cycle), given the TV segment’s muted growth prospects. Nevertheless, expect IPL’s FY18-28E TV/digital viewership CAGR at 1%/14%.”

What it means

So, what does it mean for the various stakeholders? Will it be financially feasible for the stakeholders and advertisers given the insane value of the IPL media rights? Will brands prepare to pay so much and will more brands go more for digital and less on TV?

The landscape of IPL has completely changed from what it was a decade ago, noted Kedar Kulkarni, Vice President - Digital, Puretech Digital.

“Today, IPL is among the top advertising ventures in the Indian sub-continent. By looking at the value of the rights, we can surely expect a 25% to 40% jump in the advertising for the coming year. Brands will bring in lot of innovation in reaching to the TG. The addition of new teams is enabling higher reach which is also a good opportunity for brands to tap into more audiences,” he added.

Sodhi, too, agreed that the strategic value of sports and IPL is huge and will change the fortunes of the platforms. “The pricing is on expected lines. Brands will pay because they get amazing audiences during IPL. Also, subscription revenues and pricing will go up in the future,” he further said.

Mathias added here, “Most of the bidders will hope the IPL rights will not only increase in value drastically over the next 5 years (2023-2027), but will also use the impact of the 50 days of the tournament to drive viewership across other programming properties of the channel.”

But will brands be ready to shell out more money as ad rates will definitely go up? Moreover, will digital have the upper hand over TV as far as advertising money is concerned?

Mathias noted that as of now, TV viewership is still ahead, but increasingly digital may move ahead. “In the current auction, the bid value of Digital rights is just 13% lower than broadcast rights. However, there are advertisers who see greater value in TV, as opposed to digital,” he added.

With Viacom18 winning the digital rights, how will it change the streaming landscape of the country? What Viacom18 will bring to the table?

Analysts say that IPL will help Voot, Viacom18’s streaming platform, to leapfrog and scale new heights. Sodhi felt that Voot and Jio platform will take leadership position without doubt.