When Nimbus could not earn enough from cricket to enable it to pay the BCCI the contracted guarantee for the broadcast rights for Indian cricket played in India, what is STAR India doing, bidding considerably more than Nimbus per match?
“Star TV will pay about 400 million rupees (about $7.9 million) on average for each match, compared with the 322.5 million rupees (about $6.3 million) paid by previous rights holders Nimbus. The BCCI terminated its deal with Nimbus in December, three years before it was due to expire, over payment defaults,” saysReuters.
Is STAR’s punt a misplaced one?
STAR’s taken a brave, considered bet. Indeed, Multiscreen Media (MSM), who bid marginally less than STAR did (Rs 3,700 crore vis-à-vis STAR’s Rs 3,851 crore) could be kicking themselves for having missed out by just Rs 150 crores – that’s about Rs 1.5 crore per match.
MSM were just that little bit less brave than STAR.
The bedrock of STAR’s bet (and indeed, MSM’s) is the change in the revenue pie for television in India thanks to the TRAI recommendations on digitisation. In August 2010, TRAI had submitted recommendations on the “Implementation of Digital Addressable Cable TV systems in India”, proposals that have been accepted and notified. As a result, all cable systems in the four metros are scheduled to go digital by 30 June 2012 and systems in the rest of the country by 31 December 2014.
Even if, as experience has shown, the roll out is not as fast as envisaged by TRAI, there can be little doubt that the country will be fully digitised by not too long after December 2014 – which means STAR India will operate for close to four years in a fully digital environment.
In such an environment, where the channel has the ability to charge every viewer who wants to access the channel, there is an immediate drop in the pressure to sell advertising. Cricket will, for the foreseeable future, be ‘premium’ content that subscribers will pay for. To illustrate the change, let’s take this: “The number of direct-to-home (DTH) subscribers witnessed a growth of 62 percent in 2010-11,” says research firmICRA. Currently, for example, on TATA Sky, STAR Sports and ESPN charge Rs 29 per subscriber per month, STAR Cricket Rs. 25. The growth that ICRA reported, 62 percent, are all new revenue targets for STAR India – and the more digital India gets, the more revenue STAR could target. If subscribers do not pay, they do not watch – as simple as that. In the analog system, a subscriber might have paid – and STAR might have received nothing from him, with the cable operator pocketing the subscription. In the digital regime, this is impossible.
Fundamentally, STAR India is taking a punt that the TRAI means business, and that digitisation will trundle on at the scheduled pace or near to it.
Why did STAR India bid (and win) and not ESPN STAR Sports, the JV between STAR and Disney-owned ESPN? “ESPN Star Sports (ESS), the 18-year-old sports broadcasting joint venture between ESPN International and News Corp, is under review for a possible operational split of its Indian business. The move aims to boost the Indian footprint ESPN’s parent Walt Disney and give flexibility to both parties to pursue expansion in India’s booming pay TV market,” saysFinancial Express.
The BCCI win gives STAR India CEO considerable clout at the negotiating table when the nitty-gritties of the divorce are hammered out. ESPN, in effect, loses out on a large part of cricket for the next six-and-half years if they play hardball with STAR. The cricket win changes the power equation – and the divorce would be a lot friendlier than it would have been if MSM had been a couple of hundred crores braver.
Things are looking good for STAR India. They’re leading the pack in the most lucrative part of the TV business with STAR Plus, and the cricket win means that there’s a new genre (as far as they are concerned) that they will have considerable play in.
Well played, STAR India.