The business of IPL is in playing the long game

Worldwide, the buying of sports broadcasting rights and making them commercially viable is an extremely complex business. The deeper the pocket, the bigger the investments, and the longer the time to make a business profitable.

One of the first things that come to mind when we talk about the Indian Premier League (IPL) is numbers — and it’s mind-boggling. Not for nothing, the IPL is among the top two sporting properties in the world. For its sheer appeal, the domestic Twenty20 league of the Board of Control for Cricket in India (BCCI), is a product tailor-made for various types of screens, and is a major family entertainer.

Another edition of the IPL is upon us. The BCCI, as always, expects the tournament to be a success both in terms of organising it and revenue. By creating a window in the calendar, the International Cricket Council (ICC) has also ensured that the IPL gets the best players from across the world. Other T20 leagues are yet to get this luxury. This is evident of the BCCI’s might, which has been firmly established in the corridors of world cricket.

Big numbers

In corporate evaluation, big numbers may glorify the brand value of a product, but they may not translate into proportional returns for investors. The $10.7 billion IPL is a classic case study. While the BCCI is assured of its money, mainly through broadcast rights and title sponsorship, the various stakeholders — chiefly the media houses who invest heavily — are not (yet) laughing all the way to the bank.

Publicly accessible reports suggest that broadcasters could be bleeding money, and by conservative estimates, Disney STAR and Viacom 18 (the current holders of the IPL’s television and digital rights, respectively) could end up losing a lot of money at the end of the current five-year cycle (2023-2027).

It is pertinent to mention that Walt Disney and Reliance have announced a joint venture (JV) with the former holding 36.84 per cent stake and the remainder in control of the Mukesh Ambani-owned behemoth and its entities.

Big losses

Let’s look at some figures. The current five-year IPL broadcast rights, worth Rs 47,333 crore, are owned by Disney STAR (TV rights) and Viacom18 (digital rights). Effectively, Disney STAR and Viacom18 must pay Rs 9,466 crore to the BCCI every season.

Some reports estimate that Viacom18 (Jio), the official streaming partner of the IPL, made about Rs 2,500 crore from advertisement revenue during IPL 2023. Television ad revenue (for Disney STAR) was estimated at around Rs 2,000 crore. Together, the companies made about Rs 4,500 crore in 2023 — which, according to the estimate in the previous paragraph is short by over 50 per cent. Assuming that advertisement revenues improve substantially over the next four years, or even double, even then, by this rate, the JV could lose a lot of money.

An extremely complex business

Interestingly, this is not much of a concern. Domain experts and international brand value evaluators believe that sports broadcasting rights have always been a ‘loss leader’ not just in India, but also in developed countries like the United States and the United Kingdom. In India, and especially in the case of the IPL, broadcasting companies have lost in every cycle — Sony in the first, and Star in the second.

Worldwide, the buying of sports broadcasting rights and making them commercially viable is an extremely complex business. Big media houses have visionary objectives. The deeper the pocket, bigger are the investments, and longer is the time span to make a business profitable.

Owning a multi-billion-dollar sports property also gives bragging rights and social status to its owners. This ability to withstand crores of losses helps to capture the market and wipe out competition in the long run. The current trends in India indicate that.

Marking boundaries

The failure of Sony merging with Zee and with the Disney-Reliance JV expected to start calling the shots anytime now, competition for sports (read cricket) rights in India may likely not see any major bidding war hereon.

It is unlikely that tech majors like Amazon, Google, or Meta will seriously contest for sports rights in India. These companies are comfortable in their respective content business domains, and keep cornering a major chunk of digital advertisement spends. So why burn a hole in the pocket by experimenting with cricket rights!

Interestingly, e-commerce giant Amazon will remain in the sports rights business by engaging in strategic and focused alliances. For example, Prime Video will be the home of ICC cricket in Australia until the end of 2027. Every World Cup, World Test Championship Final, and Champions Trophy match will be streamed exclusive and live on Prime Video Down Under.

Missing finer details

Going forward, all eyes will be on the Disney-Reliance JV. It can’t be all hunky dory for two of the biggest media houses in the world. Disney will certainly leverage its rights to make its General Entertainment Content (GEC) business profitable, while Jio, a digital behemoth in its right, will seek higher Average Revenue Per User (ARPU) in the digital space.

The GEC and live sports content are intertwined and it’s difficult to carve out real profits from the GEC business and real loss from the sports business. In any case, the finer details of profit and loss are seldom revealed.

Complex and unpredictable

Will Artificial Intelligence (AI) play a role in the future bidding processes? Even if it plays a role, it will boil down to how much money companies are willing to burn despite knowing that loss is inevitable. What Rupert Murdoch’s 21st Century Fox did in the past, Reliance may not do in the future.

The JV means that bidding wars for broadcasting rights could be lesser, and this in turn could make the broadcasters have the advantage of better bargaining power with advertisers. This can also give them leverage to charge more from subscribers in the future. As for the IPL, broadcasting rights might not see the valuation jumps seen in the past.

The IPL’s money matters are complex and unpredictable, just like its players’ auctions. The players with the highest price have almost always failed to provide an appreciable return on investment.

As long as the affinity for snackable cricket content remains, the shorter formats will thrive. The IPL may be seen in a new avatar, say with more than four timeouts to enable broadcasters to monetise better.

(Soumitra Bose is a senior journalist and researcher. Twitter: @Soumitra65)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.