Cricket, they say, is a game of glorious uncertainties. In India, that applies to the management of the game, too.
A fortnight ago, the Essel Group, promoted by industrialist Subhash Chandra who runs more than a dozen television channels in the country (under the Zee umbrella) pulled out of the four-year telecast rights deal it had signed with the Board of Control for Cricket in India (BCCI) less than a year ago.
Chandra had committed more than $200 million (Rs820 crore) for exclusive rights to matches that the Indian team would play in neutral territories, such as Ireland, Malaysia and Dubai. “The ground reality has changed since the time we signed the deal last year,” says Ashish Kaul, executive vice-president, Essel Group. Chandra and BCCI have shared a love-hate relationship in the past. And while it was widely speculated that their pact might not run its four-year course, no one expected it to collapse even before it took off.
A couple of days before this mishap, BCCI was forced to give a hefty discount of $57 million to Nimbus Communications Ltd, the sports marketing and production company, which had bid $612 million for the rights to the matches that the Indian team plays within the country. “There has been a significant change in the regulatory environment since we signed the deal,” says Shashi Kalathil, CEO, Neo Sports Broadcast Pvt. Ltd, the broadcast arm of Nimbus.
Neo Sports also finds itself on the other side in a deal it signed with Star-India, the Rupert Murdoch-owned broadcast network, early this year for the distribution of Neo Sports and Neo Sports Plus.
The deal had reportedly been signed for Rs400 crore, but now Star is asking for a concession. “We are sailing in the same boat and grappling with the same problems,” says a senior Star executive, who did not wish to be identified.
Meanwhile, cricket advertisers—who spend between Rs500 crore and Rs800 crore a year and are a major source of sustenance for sports broadcasters—are also clamouring for “price correction” in advertising rates. “With a drop in viewership and the confusion regarding exclusivity of content, it is natural to expect cricket ad rates to drop,” says Sunder Raman, managing director, Mindshare, a media buying house.
Those who find the game played behind-the-pitch more interesting than the one played on it are not particularly shocked by this chaos. “In India, cricket and controversies have become a routine affair,” says a media expert with a leading consultancy, who didn’t want to be identified. The only difference this time is that the fracas has been triggered by some government regulations.
Nimbus and the Essel Group placed heavy bets on the BCCI matches because, controversies notwithstanding, it is these events that generate excitement without fail. The two players, thus, thought rights to the property would help them build their new sports broadcast business, and help them penetrate the fast-growing cable and satellite (C&S) market. Once they had enough eyeballs, the logic went, ad bucks would follow.
At present, of a total of 112 million television households, around 68 million are estimated to have C&S connections. According to estimates, the C&S market generated around Rs11,700 crore in subscription revenues in 2006. The advertising potential of this market was estimated at around Rs6,600 crore, of which sports broadcasters accounted for around 10-12%. While this in itself was an attractive proposition, new technologies such as direct-to-home, IPTV and mobile TV promised an additional source of income, not to forget the huge population of non-resident Indians in markets such as the US, the UK, Canada, West Asia and South Africa. “All these markets are strong pay markets and have huge revenue potential,” says Neo’s Kalathil.
All these hopes, however, were dashed by a series of government diktats in the past two years. While there has been a ceiling on prices of C&S channels across the country for almost two years now, a mandatory roll-out of the conditional access system (CAS) in the most profitable territories of the four metros—Delhi, Mumbai, Kolkata and Chennai—early this year further queered the pitch for broadcasters. In CAS areas, prices are fixed at Rs5 per channel, thus limiting the broadcasters’ ability to exploit their full potential. Sports broadcasters charge consumers Rs25-35 for their channels in non-CAS areas. To add to their woes, the government brought in a new law in March that made it mandatory for broadcasters to share all events of national importance with public broadcaster Prasar Bharati. Cricket was classified one such event.
Prasar Bharati runs a network of terrestrial and C&S channels and carrying some of its free-to-air channels like DD (Doordarshan) National is mandatory for all cable operators. This means that DD National is available across all TV households in the country. Prasar Bharati airs the matches (after getting signals from the rights holder) on DD National and, hence, all consumers across the country can view cricket without having to buy the private channels, which originally spent a huge amount of money to buy the rights to telecast it. “This not only jeopardizes our subscription revenue model, but also dents our ability to sell to advertisers, who would pay a premium only for exclusive content, and not for the one that is free for all,” says R.C. Venkateish, managing director, ESPN Software India Ltd.
Incidentally, the satellite through which Prasar Bharati beams its channels into India has a larger footprint across Asia and some parts of Africa. So, the cricket feed, by default, is beamed into these markets as well, scuttling additional sources of revenue for private broadcasters.
Yet another annoying regulation—a must-share and must-carry obligation for all broadcasters and DTH operators—has resulted in the availability of all DD channels on all private DTH platforms, such as Tata-Sky and DishTV. This means that cricket is available on these platforms, too, and obviously, like cable operators, DTH service providers have no incentive to tie up with private sports broadcasters. “These regulations have vacuumed out all possibilities of revenue generation for private broadcasters,” says Kalathil.
Private channels have made repeated pleas to the government to ask Prasar Bharati to encrypt its signals, a technical process that will ensure that the signals are downloaded only by those authorized to do so.
The government, when it brought in this law, had stipulated that signals would be encrypted and had even set up a committee to study the matter, but nothing has happened yet.
BCCI, on its part, is also trying to convince the government on the issue. “We are ready to bear the cost of encryption for Prasar Bharati. We have already conveyed this to them,” says Lalit Modi, vice-president, BCCI.
While Essel walked away from its deal with BCCI, Neo is still stuck. About 20% of the 207 days of cricket it was promised by BCCI has already passed and three crucial series with Australia, Pakistan and South Africa are coming up between October 2007 and April 2008.
“We are hoping the matter is resolved by then, otherwise we will have no option but to request BCCI to rework the deal,” says Kalathil.
Reworking the deal might not cause much damage to BCCI. It could still make a lot of money, but if the issue is not resolved in time, it could definitely wreck some broadcasters’ chances of survival. That’s a certainty all stakeholders in the game would want to avoid.