How the Zee-Disney’s ICC rights deal will impact the broadcast sector

Disney Star and Sony Pictures Networks India (now Culver Max Entertainment) are making way for two more big networks, ending the duopoly they have enjoyed in India’s sports broadcast space.

Viacom18 in April this year launched a sports channel called Sports18 and Zee Entertainment has re-entered sports broadcasting after six years, with Disney Star sub-licensing the TV rights of the International Cricket Council’s (ICC’s) Men’s and Under-19 tournaments in the 2024-2027 cycle.

“This is a first-of-its-kind partnership in the Indian media and entertainment landscape. While this could set off a trend, all the major media conglomerates like Disney, Star, ZEE and Viacom are already engaged for ICC and IPL (Indian Premier League) events for the next four to five years,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

New players
India’s sports broadcast market has been a duopoly with Star and Sony ruling the roost. With new entrants like Viacom18 and Zee, the market would only get more competitive, which is a welcome development, said Nitin Menon, co-founder, NV Capital.

“Though Disney has always had an advantage in sports over the last decade, the aggressive entry of Viacom18, through James Murdoch, could create a dent in the Disney sporting universe,” Menon said.

The ad revenue share of the sports genre in overall TV advertising is expected to increase as a result.

Ad revenue increase
Subscriptions contribute 60 percent of revenue for the TV industry and advertising the remaining 40 percent.

“In terms of sports, ad is moving towards 17-18 percent; this number was 8-9 percent earlier because of price hikes in properties like IPL; also, cricket ad pricing saw no impact of Covid-19. As for subscription revenue, sports accounts for 10-11 percent,” said Karan Taurani, Senior Vice President, Elara Capital.

It is estimated that 22 percent of all TV ad revenue is generated by the sports genre, said Jasani.

“Share of the sports genre in TV advertising could increase to 30-32 percent over the next five years if broadcasters succeed in passing on inflation in cricket rights (IPL, ICC) to advertisers,” Jasani said.

For IPL, TV ad rates are expected to increase by 10 percent and are estimated to go up to Rs 19.8 lakh per 10-second ad slot from Rs 15-18 lakh during IPL 2022.

During the media rights auction held in June this year for IPL, the league recorded Rs 23,575 crore for TV rights, up from Rs 16,347 crore paid by Star India (now Disney Star) for the 2018-2022 cycle for combined TV broadcast and digital rights. TV rights for the 2018-2022 media rights cycle are valued at Rs 11,410 crore.

Pricing pressure
“A sharp increase in the cost of cricket rights could mean pressure on profitability for TV players and pressure on entertainment (non-sports) advertising on TV, especially if broadcasters manage to pass on inflation in sports content cost to advertisers,” Jasani said.

“As the prices for these rights (IPL and ICC India cricket events) have gone through the roof, recovering them could become increasingly difficult for the networks,” he added.

In the case of Zee, it is estimated to have paid around Rs 53 crore on a per-match basis for the ICC tournaments that include the Champions Trophy, World Cup and T20 World Cup T20.

The acquisition price is around 5 percent lower than that paid for IPL at Rs 57 crore per match for the TV rights. The pricing per match is not comparable with the World Cup in which each team plays 50 overs, said Taurani.

“Pricing for a 10-second slot for a 50-over match is lower as compared to a T20 match. World Cups have lower viewership share for most matches which are non-India, whereas IPL generally has a higher share of eyeballs, which makes it tough to monetise content costs,” he added.

Not in the same league?
Ad rates for key matches like India-Pakistan clashes may rise as high as to Rs 17-18 lakh for a 10-second spot during the T20 World Cup but remain in the range of Rs 14-15 lakh for other encounters, media planners said.

“ICC events are not in the same league as IPL. However, marquee properties like the World Cup, Championship League and Asia Cup have a strong following and will command premium ad rates, which are comparable to IPL ad rates,” said Menon.

With premium ad pricing, Zee’s merger with Sony will come into play, said can Zee get strong advertiser traction, Jasani said.

“Zee-Sony combine could aim to generate similar revenues for ICC events, but viewer fatigue and resistance from advertisers to rate rises could create some issues,” he said.

Viewer fatigue
For broadcast rights, competition increases the fees, said N Chandramouli, CEO of brand intelligence and advisory firm TRA Research.

“While the competitive turf is increasing, it will lead to increased advertiser costs. Also, post-Covid, interest in cricket has waned and has not come back to pre-Covid levels. It may pick up in another year or so,” he said.

In the opening week of IPL 2022, viewership on TV dropped to 229 million from 267 million last year.

One reason for this fall was attributed to the increase in viewership on digital media. While in 2021, there were 10 million people on digital media to watch IPL, the number increased to 13 million this year, Divyanshu Singh, head of sales and marketing at JSW Sports, told Moneycontrol in an earlier interview.

Increasing costs of sporting properties may be a concern. Even so, Chandramouli said, for a TV channel to be successful in today’s multi-screen age, sports are needed in the advertisers’ portfolio.

Zee’s sports inning
For Zee, ICC rights are an attempt to attract a more urban audience, Taurani said. Its viewership may increase, but how the cost economics play out remains to be seen.

“While Disney Star is likely to see no loss in viewership share, which was around 18.6 percent in FY21, Zee’s strategy to enter sports was the need of the hour as the company was consistently losing viewership share across major genres including Hindi GEC (general entertainment channel) and regional,” he added.

Zee’s viewership share dropped to around 17.2 percent in FY22 and in Q1 FY23, the share was 16.1 percent.

Taurani pointed out that India is not a multi-sports market and it is 90-95 percent cricket-led.

“Also, TV is a medium where viewers are not used to changing bouquets or subscription plans and 95 percent of customers do it once a year. TV channels with limited sports content may see viewers shifting to streaming platforms to watch the sports content being offered by the channels,” he said. Money Control