Mega broadcast merger likely to rein in revenue growth

For over two decades, cricket rights in India have sold like hot cakes, regardless of formats and events – World Cups, bilateral series or IPL. As long as India’s cricket stars are available to wield the willow, they find viewers. Advertisers queue up and media networks follow. The revenue chain has prospered.

For the first time in a long while, administrators are jittery that the party may be ending. Last month, watchdog Competition Commission of India (CCI) approved the proposed merger of Disney Star, the Indian unit of Walt Disney, and Reliance Industries-controlled Viacom18. Valued at $8.5 billion, it is the biggest such merger in the Indian media and entertainment space.

The two networks between them hold the rights for every major cricket property in India – IPL, ICC world events, and all-format bilateral cricket. With the fear of missing out playing up in the last cycle, competitive bidding between Viacom18 and Disney Star saw IPL’s valuation soar three times, World Cup valuation rose even more.

At the time, ICC CCO Anurag Dahiya told HT: “The best time to find your true value is when there is appropriate competition. If there isn’t, you will flounder.” These words have a profound meaning now. In three years, when the rights come up for renewal, where is the competition going to come from?

Cricket is heavily bankrolled by broadcast revenue. “With not more than 2-3 serious bidders, there is a high likelihood that valuation of cricket properties will, if not come down, not see the quantum of growth that we have seen,” said Karan Taurani, sports business expert.

The assessment is seconded by D&P Advisory, whose latest report estimates a 10.6% drop in IPL enterprise value. “The days of escalating bid prices driven by fierce competition may be behind us, casting a shadow over the future growth trajectory,” said Santosh N, one of the authors of the report.

Consolidation in IPL valuations would in turn mean lower profits for franchise owners. A drop in ICC valuations would worry smaller cricket boards that rely heavily on their share from the global body’s revenue pie. Disney Star has already complained about its existing deal that entails a payout of $3 billion, citing several factors. A decline in the value of Indian bilateral matches won’t be a surprise given the game’s shifting trajectory towards big tournaments.

Rights holders have been unable to bolster advertising income anywhere close to covering the high acquisition spending. As an immediate fallout of the merger, there may be a fresh push. “It may happen more in digital because they have to cover the absence of subscription revenue due to free streaming. Besides, connected TV adoption will become big, providing greater scope than mobile advertising,” said Taurani.

Despite the churn in the media space, including the failed Sony-Zee merger, cricket is still well placed. A Group M report estimated that 87% of the sports industry spends in 2023 came from cricket. Unlike other sports, and other cricket markets where media rights deals are extended without appreciation, valuation hasn’t plateaued in Indian cricket.

Besides, Indian cricket has seen broadcast monopoly play out before. Before Viacom18’s arrival, Star held rights to all the big properties and its only serious competitor was Sony. “Sony’s bidding would be disciplined, but they will participate. We may be returning to that phase,” said an industry executive.

Some are more optimistic. “Sports is the only appointment viewing content and a definite lever to retain and expand viewer base. For linear broadcasters and digital new media platforms like Meta and Amazon, having a play into sports, especially cricket, may be a strategic necessity. I believe that we will see the next wave of enhanced competition in the acquisition of cricket rights,” said Rajesh Sethi, former Ten Sports CEO.

Digital packaging
With digital penetration increasing and data costs gradually becoming more affordable in smaller towns, there is room for a further uptick in digital value. “If the movement is in digital space, so be it. It may be Netflix, Apple, YouTube or Meta. I am sure we will have many more players,” IPL chairman Arun Dhumal told HT earlier this year.

The stumbling block has been a lack of interest from major tech players in cricket. Meta put up a serious bid for IPL rights in 2017, but never returned. The Reliance-Amazon face-off in the last cycle was a non-starter.

IPL tried segmented sale with a new category of limited matches in digital during the last cycle, but Viacom18 lapped them up to retain exclusivity. Cricket’s unique country-based calendar leaves league cricket with a limited window; even IPL wraps up in two-and-a-half months. Hindustan Times