Rohit Gupta’s voice over the telephone doesn’t have the fervour it had around a fortnight ago. Multiscreen Media Pvt. Ltd’s, or MSM’s, president, network sales and revenue management, is a little edgy and ducks most questions. “I don’t want to talk about the new deal…the priority right now is the negotiations with advertisers…”
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These negotiations should have ideally gotten over much earlier but for an unexpected legal fracas with the Board of Control for Cricket in India, or BCCI, in which MSM had to cede a defeat.
The long and short of that story is that the cricket board forced MSM and the sports marketing agency, World Sport Group, or WSG, to renegotiate and buy exclusive media rights for Indian Premier League, or IPL, for $1.6 billion (around Rs8,200 crore then)—about 55% more than the $1.03 billion they had agreed to pay in 2008.
The new deal that Gupta is referring to has been signed for nine years, against 10 previously. “The corresponding value for 10 years would have been $1.75 billion,” says a senior executive of a media buying company closely involved with the development who did not want to be named.
Hot property: India being a one-sport nation, cricket is a great platform for advertisers to reach a wide audience. It also remains the sole preserve of BCCI, which has built its monopolistic status by keeping competition at bay.
“...it’s an unprecedented spike in the value of a property that’s merely a year old...it is going to be difficult for them (MSM)...especially in the current economic environment,” he says. “To be honest, I wouldn’t like to be in Rohit’s shoes.”
This is not the first time BCCI has locked horns with a broadcaster. In fact, the cricket board has courted controversy several times. And it has always got the better of its opponents. In 1999, BCCI had sold its telecast rights to state broadcaster Doordarshan for five years for a mere Rs240 crore. In 2004, when the rights came up for renewal, the Subhash Chandra-promoted Essel Group bought the rights for Rs1,200 crore. This deal was, however, scrapped because of several legal fights among the bidders and BCCI.
A year later, the value of the property had increased to $612 million. This price was paid by the Mumbai-based media and entertainment firm Nimbus Communications Ltd. But, the difficult distribution environment and loss of exclusivity because of a condition that it share the rights with state broadcaster Prasar Bharti foiled Nimbus’ plans.
The broadcaster managed to get a concession of around $200 million from BCCI, but at least two media buyers and a person who had been closely involved with Nimbus said the broadcaster was still likely to lose around Rs300-400 crore by the end of the five-year deal. A senior Nimbus executive refused to discuss financials, but said the broadcaster would yet again bid for the rights when they come up for renewal in 2010.
The sentiment was no different when BCCI put up IPL telecast rights for sale. Despite being an untested cricket format, IPL had many leading broadcasters queuing up. The deal finally went to MSM and WSG, who placed a whopping $1.03 billion bet on it. And MSM and WSG yet again bent and agreed to pay BCCI 55% more when the broadcaster pushed for renegotiations in March. It is not difficult to understand why broadcasters, especially those airing cricket matches, have always courted BCCI, ignoring the ugliness involved in the relationship. India continues to be a one-sport nation, and that sport is cricket. Cricket in India remains the sole preserve of BCCI, which has built its monopolistic status by keeping competition at bay. Also to its credit, it has kept consumer connect with cricket alive through innovations such as the IPL and the Twenty20 Champions Trophy.
According to Prashant Kumar, managing partner, central trading group, GroupM India Pvt. Ltd, the media buying arm of marketing communications group WPP Group Plc., around Rs800-900 crore was spent on sports in 2008. While cricket, including the international matches played abroad, accounted for around 95% of this, cricket matches owned by BCCI, which essentially include the Indian team as one of the participants, in turn comprised at least 95% of this.
“It should suffice to say that some of the multinational sports broadcasters generate more than 75% of their advertising revenue from India and more than 90% of this comes from cricket,” says a senior executive of a sports broadcast company, who did not want to be named.
Advertisers also see a lot of value in cricket. “Let us face it, cricket is the only property left in the market that has mass appeal. It cuts across demographics, geographies, age groups, income groups and genders,” says Punitha Arumugam, group CEO, Madison Media, Inc., an arm of Mumbai-based marketing communications group Madison Communications Pvt. Ltd.
Even Bollywood films, known to have the same unifying appeal as cricket till some time ago, have got segmented with the advent of the so-called “multiplex cinema” that caters to the upscale urban audience.
That leaves cricket. “It’s (cricket) a great platform for advertisers wanting to build a faster and extensive reach across the market,” says Arumugam. MSM took a bold step by agreeing to a higher sum to keep the IPL rights. The big question now is, will it be able to make good the deal? Surprisingly, even as most observers argue that $1.6 billion is an astounding sum to pay for a newly launched cricket property, they also say that if IPL manages to keep viewers glued to television, advertisers will want to come on board.
Fortunately for MSM, there are many stakeholders this time who will do what it takes to keep the IPL magic intact. To begin with, there are eight franchisees which have spent about $700 million to be part of the venture and invested $50 million in building their star-studded teams. Many of these franchisees are listed corporate entities answerable to shareholders.
Then there is BCCI itself—IPL’s success is paramount for it. It has become one of the richest cricket boards in the world, but if that wealth were to be built upon, BCCI would have to make sure that the IPL grows in stature, not just within India, but globally.
Independent of these, MSM has a good opportunity to build its revenue over the years. BCCI, for instance, plans to add at least four new teams to the existing eight over the next few years. The addition of one team will lead to the number of matches going up from 59 to 75. This will lead to a substantial increase in inventory. In a 2-hour game, there are 1,800-2,000 seconds available for commercial exploitation. “With the number of matches going up, the amount of advertising time will also go up for MSM,” says Arumugam.
Another media buyer points out that if the IPL manages to draw eyeballs, advertising rates will shoot up further. “Properties like the IPL are built over time and though it looks like a lot of money right now, it’s a long-term decision Sony has taken, and I’m sure they have taken the fast-changing media landscape of India into consideration,” says Shashi Sinha, chief executive, Lodestar Universal, a Mumbai-based media buying agency. “…look at the way rates have changed already between last year and now.” Last year, MSM began selling 10-second spots for Rs1.5-2 lakh. This year, the price has already gone up to Rs3.5-4 lakh. Even the sponsorship rates have increased by nearly 35%, points out another media buyer who did not want to be named.
BCCI is also introducing some extra commercial time through an innovation called Time Out. “This will essentially be a 5-minute match break after every 10 overs, where teams will get together to strategize and it will be aired live,” says Gupta. “We will also be given some advertising time during this match break.”
Some, however, are still skeptical about MSM’s ability to enhance its ad revenues. “...as the number of matches and the number of teams increase, match classification will set in because there will then be A-grade and C-grade teams, and advertisers will go to only a few matches,” says Basabdatta Chowdhuri, chief executive officer, Madison Media Plus, arguing that MSM will not be able to exploit all the commercial airtime at its disposal.
MSM, however, is confident that it will emerge a winner eventually. “We have a strategy in place. We wouldn’t make a commitment at the cost of our survival,” says Sneha Rajani, business head and executive vice-president, MAX, the channel in MSM’s bouquet that will air the IPL matches.
The irony of the situation, however, is that even if MSM emerges victorious, it will have made BCCI stronger.