2022-07-06
f33b5c0668c2832b7e2040e469dfe026 original

Mumbai: Sony Television is learned to have won the television (TV) media rights for the Indian Premier League (IPL) for Rs 23,575 crore while Viacom 18 is believed to have bagged the digital media rights for the professional men’s Twenty20 cricket league by bidding Rs 20,500 crore, according to sources.

The media rights for 2023-2027 have been sold for a whopping Rs 44,075 crore for 410 matches on Monday, a premium of 170% or 2.7 times the winning bid of Rs. 16,347.50 crore for both TV and digital by Star India in September 2017.

Previously, Sony Pictures Network paid Rs 8,200 crore for the IPL TV media rights for a 10-year term at the tournament’s debut.

According to the most recent information, Package A of TV is sold at Rs 57.5 crore per match and Package B of Digital Rights for India is sold at Rs 50 crore per match, with a total value of Rs 107.5 crore, putting the IPL in the top tier of all sports in terms of per-match value, alongside the NFL and the English Premier League. (Refer to the chart below)*

NBA ‚Äď Highest brand valuation in global leagues

League name                           Country           Brand valuation (USD bn)

National Football League       US                   13
Major League Baseball           US                   10
National Basketball Association US               7.4
Indian Premier League            India               6.3
English Premier League          UK                  5.3
National Hockey League        US                   4.43
*Source: Elara Securities Research

Sony is believed to have paid a premium of 30% over the reserve price as TV medium is largely matured and subject to tepid mid to high single-digit ad growth while Viacom has paid a premium of 70% over the reserve price given it enhances users on any platform and also enables cross-selling of other content and the digital segment has potential to grow at over 30% helped by increased penetration and consumption trends.

However, there is no official confirmation on the winners of Package A and Package B, respectively. Aside from packages A and B, which are television and digital groupings for the Indian broadcast region, there are two other packages in contention: Package C, which has 18-game non-exclusive special matches (base price of Rs 11 crore), and package D, which has rest of the world rights (base price of Rs 3 crore). Both the packages are currently under bidding.

IPL Rights ‚Äď Winner’s Curse For Broadcasters?

A large-ticket property like IPL is critical for any broadcaster’s digital strategy. For example, IPL accounted for one-third of Star’s income (TV+Digital), confirming its significance. If Star was to get IPL rights, its revenue contribution was likely to increase to 40% as digital growth accelerates. According to estimations, the IPL accounts for 70% of Star India’s AVOD revenue, with SVOD revenue following suit.

According to Elara Securities, IPL will result in a significant increase in various metrics for any OTT platform, such as monthly active users (MAU)/daily active users (DAU).

“As IPL content costs a substantial premium (Rs 10,000 crore per year), any broadcaster with such rights may not be able to break even until the fourth year (of the five-year cycle), given the TV segment’s limited growth prospects. Nonetheless, IPL’s FY18-28E TV/digital viewership CAGR is expected to be 1% / 14% respectively. TV gross profit margin will peak at 12% in the fifth year whereas digital gross margin will breach 35% in the fifth year,” Karan Taurani, an analyst at Elara Securities told ABP Live.

Turani believes that for TV, concerns persist on the subs revenue front which will keep ARPUs under check due to regulatory headwinds while for digital, the premium is a tad lower than our estimate, as many tech giants did not end up bidding for the same and backed out.

On an overall basis, the valuation of the rights at over Rs 44,000 crore is likely to go up to Rs 50,000 crore once the bidding for Package C and Package D for cluster rights and overseas package ends on Tuesday.

On the above basis, TV rights have moved up 2x as compared to the earlier cycle, backed by 40% more number matches and inflationary trends in pricing. Digital rights on the other hand may breach 5.5x (including non-exclusive cluster) versus earlier cycle backed by better viewership growth and penetration opportunity.

The IPL revenue for teams is estimated to grow 2x towards Rs 650-750 crore helped by a jump in media rights and an increased number of matches. PBT margins too are likely to move towards a range of 30-40%, from the current PBT margin of 15-25%, which is likely to impact team valuation positively, and May breach towards Rs 8,000-10,000 crore mark.  (Refer to the chart below)*

IPL Team Valuations: Mumbai Indians are most valued

Team                                       (USD mn) Valuation               Revenue

Mumbai Indians                      1,320                                      33
Chennai Super Kings              1,173                                       41.2
Kolkata Knight Riders            1,120                                       41.2
Lucknow Super Giants           945                                          N/A
Delhi Capitals                         1,053                                       35.4
Royal Challengers Bangalore 1,040                                        36.4
Rajasthan Royals                    1,013                                       31.7
SunRisers Hyderabad              987                                          31.8
Punjab Kings                           933                                          31.2
Gujarat Titans                          747                                          N/A

*Source: Forbes Report on IPL

In terms of market cap, the biggest delta market cap is for SUNTV which as the team will contribute almost 40% of market cap post new valuation, whereas, for United Spirits, it will be 18% of market cap contribution; for RIL it will be as low as 0.7%.

The IPL Math:

IPL Revenue (100%)

BCCI (50%) Divided between all teams (40%) Divided between top four teams (10%)

Lucknow franchise fetched the highest in bids

Team                                                  Amount (USD mn)    Year    Owner 

Mumbai Indians                                  112                              2008    Reliance Industries
Royal Challengers Bangalore             112                               2008   United Spirits
Deccan Chargers                                 107                              2008 Deccan Chronicles
Chennai Super Kings                          91                               2008 India Cements
Delhi Capitals                                    84                                2008 GMR & JSW Group
Punjab Kings                                      76        2008    Mohit Burman, Ness Wadia, PZNZ Media
Kolkata Knight Riders                        75        2008    Shah Rukh Khan & Juhi Chawla
Rajasthan Royals                               67        2008    Emerging Media Ltd
Pune Warriors India                            370      2011    Sahara Group
Kochi Tuskers Kerala              333      2011    Rendezvous Sports World
Sunrisers Hyderabad                           72       2013    Sun TV Network
Lucknow Super Giants                      945      2021   RP-Sanjiv Goenka Group
Gujarat Titans                                                 749      2021   CVC Capital Partners

*Source: Company data.

Note: Deccan Chargers, Pune Warriors India and Kochi Tuskers Kerala were terminated by the BCCI. All the teams were bought for a period of 10 years, except Sunrisers Hyderabad’s five years, which was extended later.

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