Star India's Uday Shankar is playing games to induce faster growth in his broadcast business that happens to be the largest in the country.
Jeff Bezos made headlines few months ago when he announced $2 billion investment by Amazon in India’s fledgling e-commerce market. Uday Shankar wasn’t cheered much even as Star India lined up $5 billion investment and that, too, in only one genre – sports- of the large broadcast business he presides over. In contrast to the recent rise of e-commerce, sports broadcasting is a two-decade-old story, yet the two businesses have dubious similarities. Both, for instance, are burning cash with little likelihood of turning in profits anytime soon. And both are like tiny spots in the vast ecosystem they exist in.
Sports’ share in the total TV viewership, for instance, is as small as 1.5-2%. While its share in the advertising pie is disproportionately bigger—varying from 15% to 18% in the recent years—the absolute revenues generated are offset against the massive acquisition costs of events (see chart). Between 2008 and 2013, ad spends on sports grew more than 95% from R1150 crore to R2250 crore. But the cost of acquisition of coveted properties, such as the FIFA World Cup and the International Cricket Council (ICC) matches, too, saw a steep increase. Star India, for instance, paid $1.98 billion for ICC rights from 2015 to 2018 against $1.1 billion in the previous period. When converted into rupees, it’s a jump of more than 110%.
Broadcast ARPUs (average revenue per user or the average subscription fee a broadcaster earns from consumers) in India are under state control and networks are not at liberty to price their channels as per their cost-benefit assessment. Digitization has yet to bear fruits. And the other two sources of monetization—international syndication and digital—have yet to turn meaningful.
The net result is that most sports networks, including Ten Sports owned by Zee Network, Neo Sports from the Nimbus Communications stable and Star Sports owned by Star India, are in the red. The total industry losses currently are estimated at around R2000 crore. Star, according to industry insiders, accounts for almost half of it.
Yet Shankar has shown a relentless zeal in scooping all the available top league cricket and non-cricket events in the recent few months paying enormously high prices at times. Curiously, close to 85% of Shankar’s $5 billion bet is riding cricket, the most expensive of all sports events (see chart). Beyond ICC, Star India holds BCCI events, Champions League T20 and the cricket rights of English and Australian boards.
Alongside splurging on cricket, he’s also investing in building TV-friendly non-cricket events.
If cricket was the only religion that bound Indians, then India is headed for religious diversity. That is what the incessant launch of local leagues over the past two years in sports as diverse as kabbadi, hockey, soccer, tennis, basketball and badminton would have one believe. Most of these have either been floated or invested in by the country’s most astute industrialists and entrepreneurs such as Mukesh Ambani, Anand Mahindra, Uday Kotak, Kishore Biyani and Ronnie Screwvala. Advertisers have yet to take a serious view of these experiments. Audiences, however, have given them a thumbs-up.
According to industry data, half a billion people watched the Pro Kabbadi League on a cumulative basis during its run in August. Likewise, the Indian Super League, a local soccer tourney designed on the lines of the Indian Premier League (IPL), reached a total of 170.6 million people in the first week across eight channels of Star India network. IPL, the most popular of cricket events, was seen by close to 185 million viewers in 2014.
Star owns media rights of five such local leagues (see chart). It even has an equity stake in the biggest of them all, the ISL, in which the other investors are Reliance Industries and global sports and events management company IMG.
Besides cricket and the local leagues, Star India also owns EPL, Wimbledon, and Formula One, three other global events with a dedicated fan base in India.
Shankar, clearly, is on to something big. Equally critical is the shadow his game plan is bound to cast on his rivals. With all the coveted properties under his seize, other sports networks are left with only a handful of assets, such as the IPL and FIFA World Cup rights owned by MSM and a few foreign cricket board and sundry fighting-cum-entertainment and golf events spread between Ten and Neo.
“He (Shankar) has got his pappa’s money to squander,” says a rival alluding to Star India’s deep pocket parent, the Murdochs.
Another one sees Shankar playing a sinister game to demolish rivals. “With its predatory pricing Star is hoping to edge out all players from the game,” says the CEO of a leading sports broadcast network.
Industry insiders point out that as of now, 90% of sports ad revenues goes to cricket. Of this, more than 85% is cornered by IPL, BCCI and ICC tournaments with the rest going to matches of other cricket boards. “Star has already cornered almost two-thirds of sports advertising,” says the rival quoted above. “I wouldn’t be surprised if he (Shankar) aggressively bids for IPL as well when it enters the market two years later. With that he would have wrested the control of the business,” he adds.
Nobody, however, is fearing death yet. “The market will now get divided between big boys and small. Small guys may have cheaper and less popular events but they will need less to survive,” says Harish Thawani, chairman, Nimbus Communications.
Industry peers, not willing to be named, suspect that with all the big events in his pocket, Shankar will play the pricing game by trying to squeeze more out of consumers and negotiating hard with rights owners to beat down the acquisition prices.
The gentleman’s game
Going by his seven year leadership stint at Star, Shankar, indeed, comes across as someone who plays only to win. He is a hands-on CEO, according to his colleagues. He isn’t shy of taking risks. After taking over its reins in 2007, Shankar turned around Star India’s sinking fortunes with few strokes. To begin with he cast aside partnerships that weren’t core to Star’s content business and got out of joint ventures where Star was not a majority stakeholder and hence, didn’t have the veto power. He also cleansed the flagship general entertainment channel Star Plus of the ‘K’ serials produced by Ekta Kapur’s Balaji Telefilms that had turned noxious over an eight year run. New programming and Shankar’s own projects such as long-form reportage based Satyamev Jayate gave Star Plus a much needed fillip and appreciation among its target audience.
Back in the leadership position in the general entertainment genre that determines winners and losers in the larger broadcast game, Shankar has now set his sight on sports. And once again, he is playing to win.
“Sports broadcasting in India is a poorly served and under-explored genre,” says the man. “That’s unfortunate because it is one vertical that has the potential to fulfill one of the broadcasters’ and advertisers’ biggest quest – netting male and young viewers.” Television in India, even today, is a woman’s preserve. Men flit in and out of news channels and in addition to some bit of English entertainment, they watch cricket whenever it is on. “There isn’t much on TV to hold this group’s interest,” says Shankar.
Save a few attempts to produce shows with this target group in mind – for instance, recent mini-series such as Yuddh starring Amitabh
Bachchan – broadcasters have largely had their gaze fixed on women. That’s primarily because consumer goods companies, such as Hindustan Unilever, Nestle, Proctor & Gamble, LG and Samsung, were the largest advertisers on TV for a long time and they were mainly interested in women who controlled household purchase decisions.
But the new set of advertisers, such as e-commerce and telecom companies, prefers a heterogeneous mix. For instance, of the eight sponsors that IPL had last year, five – including Vodafone, Karbonn Mobile, Amazon, Havells and TVS – target a mix of men, women and young consumers.
“After general entertainment, sports is the next biggest opportunity for broadcasters in terms of monetization potential. It’s a genre both viewers and advertisers will happily pay for,” says Vinit Karnik, National Director, GroupM ESP, the entertainment, sports and partnerships division of the country’s largest media house. And when it comes to sports in India, cricket rules. “Our own experience and research shows cricket’s popularity is not under any threat from the new leagues in the near future,” he says.
Shankar, however, has a larger agenda and cricket is merely a means to accomplish that end. He elaborates: “In sport we are where we were in the general entertainment genre in the nineties. The industry was agape when Star launched the most expensive show of its time Kaun Banega Crorepati (KBC) with an equally expensive host then. But on the back of KBC were launched soaps that kept viewers hooked for almost a decade. This is exactly what we plan to do in sports.”
In a nut shell, the plan is: get all the good cricket available, amass eyeballs, and then, shepherd them to other newly launched sports events. If successful, the effort will have freed sports broadcasting of its need of cricket for survival.
Star has five sports channels to make the most of the content it has pulled together. To take sports to the masses in a real sense, it has already begun Hindi feeds for cricket and football. Soon, they will be available in Malayali, Gujarati and Bangla, too. “My papa may be rich but I am a responsible ward,” says Shankar responding to his rival’s jibe. “It’s not a leap of faith for us. We have a road map,” he asserts.
Shankar scoffs at the insinuation that he is trying to stage a coup in the market and will eventually fleece viewers and arm twist rights owners. “Indian consumer is extremely price sensitive. Even a 5% increase in channel prices can turn them away from us. As for the rights owner, we can’t fool ourselves into thinking we are smarter than them,” he says.
There is no denying that the sports investments will bleed Star over the next few years. But Shankar is pinning his hopes on digitisation that should boost ARPUs. He also expects that a strong government at the Centre will not pursue populist agenda and decontrol pricing.
More than everything, he, like Bezos, has faith in the growth potential of India and its much-glorified one-billion-plus consumers. “This market will explode. We will make good of our investments,” he says.