Moneyball: Sony brings Star back into the game

A few hours before the media rights for cricket's biggest property, the Indian Premier League (IPL), was announced, its architect Lalit Modi had tweeted “hoping for a bid figure of 5 billion US dollars or more for a five-year period”. The bidders didn’t oblige his pipe dream, and stuck to more realistic figures. The winner, Star India, ironically won the global bid at half that amount – at Rs 255 crore.

Modi reacted saying: “....I would've hoped a larger figure Deserved greater value after 10yrs of success.” For the record, the Star bid was over 400 per cent higher than the money that the incumbent Sony had paid in 2008. But then those were early days and everybody was entering uncharted territories and the 1-billion-dollar figure then for 10 years was itself eye-popping in the world of cricket.

It was on the back of the Sony bid that Modi started hyping up the valuation figures of the franchises and the league itself, before he was banished from the BCCI and sought refuge in London. Hence his expectation of $5 billion would not have surprised stakeholders in the game, and many would have laughed it off. But having been in bed with Modi during the initial years of the IPL, one would have expected that this sort of unbridled enthusiasm would have rubbed off on the Sony team.

While everyone is analysing what seems to be an unattainable five-year target for Star (more on that later), the stand-out fact of the media rights auction was Sony's half-hearted approach to what they themselves had termed “Manoranjan ka Baap”. It was more of sedate Test cricket, than exhilarating T20 action.

No other bidder had the amount of play that Sony had in the IPL, and hence this auction.  After winning the 2008 bid and helping in creating an enviable sporting property over the last decade, and earning sufficient amount of profits, Sony's bid was a huge disappointment. It was a given that there would only be two consolidated global bids – one each from Sony and Star. But for reasons best known to them, the Sony team did not put in a global bid, and despite bidding almost double that of Star for the India TV rights lost out to Star.

Star’s consolidated bid of around Rs 16,350 crore for the India TV, digital (internet and mobile) rights as well as the rest of the world rights was higher than the Rs 15,819-crore bid that came through as a sum of the different parts bid by the other contenders. For India, Sony bid as much as Rs 11,050 crore, way ahead of Star’s Rs 6,196 crore. In digital rights, Star with Rs 1,443 crore lagged three others – Facebook (Rs 3,900 crore), Airtel (Rs 3,280 crore), Jio (Rs 3,075.72 crore), and Times Internet (Rs 1,787.50 crore).

Astonishingly, Sony put in no bid for the digital rights. It does not need any expert in media or sports to say which way digital is blowing. That is where Star’s strategy – all or none – as outlined by the CEO, Uday Shankar, worked well. But the success of this strategy also highlights the lack of any from Sony's team. In an era where even the best pundits are not sure how much TV will generate and how much digitalwill over the coming years, it seems an obvious strategy that the play had to be for all parts of the pie, especially TV and digital.

In fact, without digital the media rights lose a good part of its earning power. If one takes Sony’s bid of 11,050 crore for domestic rights, one wonders what calculation went into finalising this bid amount. This would mean a pay out of Rs 2,210 crore annually. Considering that they already make around that amount each year through advertising and subscription, a more aggressive bid would have been expected. In fact, all they needed to add in was another Rs 600 crore and they would have been a clear winner, at least for this part of the pie.

With the likes of Facebook and Jio in the fray, the sign is clear that the attempt is to garner original content as that will be the differentiator. By missing out on digital completely and miscalculating the value of the property that they were ingrained in, Sony has not only gone few steps back but allowed Star to get some shine on in the sports business where it has been floundering otherwise.

As a major stakeholder in India cricket rights, football, hockey, badminton, kabaddi, Star has gone about its business of sports with an aim to capture all that is available. But the strategy has not paid off well, except for the Pro Kabaddi League (PKL). Going forward, the Indian Super League (ISL) in football should also bring in returns, but it is still some time away. India cricket looks exciting on paper, but the interest levels are dipping for both Tests and ODIs, barring those against 2-3 top ranked countries. It is unlikely that Star will even enter the fray when the rights come up for renewal in 2018.

Though after winning the rights Shankar has mentioned that they have lived without the IPL, and were willing to live without it unless they got all rights, it would have been a tough grind for the sports portfolio if they had failed to win the IPL.

While it will be a stressful five years trying to earn beyond Rs 16,350 crore, the fact remains that at current earnings, the IPL brings in around Rs 2300-2400 crore annually. Which means Rs 12,000 crore over 5 years. If one factors in a linear annual growth of 8-10 per cent, the job should get done. And one is not even considering the explosive growth that digital could bring in.

In such a scenario, slogging towards recouping the $2.55-billion committed to the BCCI for the property will be more palatablefor the relieved Star team, than having to switch on a Sony channel or stream from Facebook for the next five years and catch an Extraaa Innings!

 

(The writer is co-founder, SportzPower & The Fan Garage)