Billionaires bet on big TV deals in Indian Premier League

After seeing high prices for two new teams that will join the ever-expanding cricket match, broadcasters and billionaires predict that there will be a fierce bidding war for their renewal of the television rights to the Indian Premier League next year.

Kolkata-based utility and retail giant Sanjiv Goenka and European private equity firm CVC Capital Partners snapped up a new franchise at the end of last month, beating out companies owned by billionaires such as Gautam Adani, Uday Kotak and Manchester United shareholder Avram Glazer.

Goenka bid for the Lucknow franchise at a price of 71 billion rupees (US$955 million), and CVC acquired Ahmedabad at a price of 56 billion rupees. A major bet on broadcasting rights in the year. This is the first time a franchise auction has attracted two financial bidders from overseas.

The current TV broadcast contract signed with Disney’s Star India will end next season, and it is expected that the next iteration will generate a bid far higher than Star’s bid won in 2018. The Rs 162 crore paid by Star for the five-year contract is almost twice the Rs 82 crore paid by Japanese rival Sony Sports in 2008 to show the league in the first 10 years.

According to Star of India, about 400 million people have watched at least one game in the past few seasons-this is not a trivial matter given the continued interference of Covid-19 in 2020 and 2021. The last two games were mainly held in the United Arab Emirates and Emirates and the 2021 season had to be suspended for four months. It ended only on October 15th when the Chennai Super Kings won, a team owned by the construction giant Indian Cement.

“As can be seen from the recent auctions, the valuation of the IPL team has risen sharply, and the broadcasting industry will also see inflation. I expect at least three big players to participate in the competition and the bidding will be very intense. I expect the bidding for broadcast rights may be Doubling is expected to be between 4000 crore and 4500 crore,” said brand strategist Harish Bijoor, which means that the value of copyright will be doubled.

If Sony succeeds in merging its Indian operations as planned, they may bid together with Zee Entertainment Enterprises. Star is also expected to bid for the right again. Other companies, including TV18 Broadcast owned by billionaire Mukesh Ambani, are also keen to get involved in new businesses.

Facebook bid for pure digital rights in 2018 and is likely to participate again. Its $600 million (390 million rupees) digital rights offer was rejected by Star in support of Star’s joint offer for television and digital rights.

The new franchise will expand the IPL team in 2022 to 10 teams, starting in March, which means that this season will increase from 60 games to 74 games.

IPL’s four-hour cricket system was an immediate success when it was launched in 2008, with the glitz of billionaires and the charm of celebrities. Reliance Industries’ Mukesh Ambani, JSW Group’s Sajjan Jindal and Wadia Chairman Nusli Wadia, and Hindi film stars such as Shah Rukh Khan and Preity Zinta are all investors in the league team.

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For cricket enthusiasts in India, superimposing movie stars and cricket legends together is like a new version of a reality show. Lalit Modi is the founder and president of the league. He brings together cricket managers from various states and provides a new vertical for the Indian Cricket Control Council (BCCI) And be praised. Look for ways to support domestic cricket.

Controversy arose early on: the allegations of match-fixing, the government’s investigation into team financing, and the allegations of misconduct that led to Modi being banned from participating in BCCI for life, although he denied these allegations and did not prove any allegations in court. But nothing has diminished the popularity of IPL or its ability to attract top players from all over the world.

Or for that matter, its ability to attract sponsorship and advertising. Match provides immediate brand recognition for companies trying to establish themselves in the Indian market. Most of IPL’s top sponsors are relatively young companies, such as Chinese mobile phone manufacturer Vivo, online teaching company Byju’s, online gaming company Dream11, and digital payment startup Paytm, which has just completed India’s largest initial public offering.

Due to increased border tensions between India and China, Vivo withdrew from the 2020 season of IPL, but returned in 2021. Just a few weeks after Dream11 paid Rs 2.2 billion for the 2020 IPL title sponsorship, it raised US$225 million from investors led by Tiger Global Management.

Management consulting firm Duff and Phelps estimated in March this year that due to the Covid pandemic, it hit ticket and food sales and introduced the cost of keeping players in a virus-free bubble, the value of the IPL ecosystem, including franchisees and Management agency, from 475 billion rupees in 2019, a drop of 4% to 4580 billion rupees in 2020. In the team, the Mumbai Indians maintained the brand ranking for the fifth consecutive year, with a brand value of 7.6 billion rupees, a decrease of 6% from 2019.

The auction of the new franchise shows that the valuation rebound from the postponement of the 2020 season has accelerated. This means that top teams-such as the Chennai Super Kings and Mumbai Indians-may reach “unicorn” status, or each team worth more than $1 billion.

Based on the price paid, Mumbai-based brokerage firm Motilal Oswal Financial Services offered shares to United Spirits, a listed subsidiary of Diageo, which owns the Royal Challenger Bangalore team. The Royal Challengers, ranked third in the league standings this year, are led by Indian national team captain Verat Kohli.

Motilal Oswal analyst Krishnan Sambamoorthy said: “Even if we benchmark the valuation of RCB with the new Ahmedabad franchise, United Spirits’ current market value still has a potential upside of nearly 10%.”

At least one billionaire thinks Goenka and CVC have paid too much. “I think the bid is very high,” said the Mumbai executive, who asked not to be named, as an advertiser for IPL. He pointed out that in 2008, the total transaction price of the first eight teams was 29 billion rupees, of which Ambani’s highest bid for the Mumbai Indians was 4.47 billion rupees.

“We think the Lucknow franchise will lose 36 billion rupees in the first 10 years,” he said. “And it will break even within 22 years.”

However, the opponents did not diminish Goenka’s enthusiasm. The billionaire stated that he will recover half of what he paid for ticket sales, team and event sponsorship, and Lucknow’s franchise share in the new broadcast rights transaction within 10 years.

Goenka and CVC must pay their winning bids to BCCI in equal installments over the next 10 years. In return, BCCI will pay an average of half of the funds received from broadcasting rights and sponsorships to 10 teams.

“The net difference between what we get and the license fee we pay to BCCI will be half… In the next 10 years we have to pay for BCCI,” Goenka told a TV channel.

Jay Shah, the son of BCCI Honorary Secretary and Indian Interior Minister Amit Shah, pledged to make the next IPL season “bigger and better” by adding new franchises.

“Despite the many challenges posed by Covid-19, the 13th and 14th seasons have been completed and the bids proved that interested parties have full confidence in BCCI and its hosting capabilities,” he said.

A sort of Version of this article First published by Nikkei Asia on November 16th. ©2021 Nikkei Inc. All rights reserved.

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