New Delhi: Sports broadcaster ESPN Software India Pvt. Ltd, which spent a whopping $2 billion (Rs9,580 crore today) to acquire telecast rights to big-ticket cricket events such as the Champions League, Champions Trophy and other tournaments run by the International Cricket Council (ICC), is in for tough times this year.
The broadcaster paid $1.1 billion for the ICC rights for eight years till 2015 and $975 million for the Champions League rights for 10 years till 2018.
Stumped: A 26 September photo of the ICC Champions Trophy match between Pakistan and India in Centurion. Viewership of the tournament was a poor 1.7%, an average for its first five matches. Rogan Ward/Reuters
Media buying agencies and sports industry analysts claim that the broadcaster may find it difficult to recover its investment thanks to dwindling viewer and advertiser interest in its cricket properties.
For a start, viewership of the ongoing ICC Champions Trophy is a poor 1.7%, an average for its first five matches played between 22 and 26 September, according to data released by TAM Media Research Pvt. Ltd, a television viewership measurement agency. Compare this to the Indian Premier League (IPL) that clocked average television rating points (TRPs) of 5.07% in the first five matches played between 18-20 April. TRPs are the percentage of viewers watching a particular television programme at a certain time. At 2.79%, even the average rating of the 21 matches played in the 2006 Champions Trophy telecast on SET MAX was higher.
Low viewership has hurt ESPN’s advertising revenue as well. Advertisers’ cold shoulder to the Champions Trophy has left ESPN saddled with an unsold inventory in excess of 30% despite pricing its 10-second spot between Rs1 lakh and Rs1.5 lakh, drastically lower than IPL season 2 rates that started at Rs2.5 lakh and went as high as Rs8–10 lakh in the final matches. The rates are low even in comparison to ESPN’s own property—the Twenty20 World Cup earlier this year, where 10-second spots were sold at Rs2.75 lakh. The figures have been confirmed by a senior executive from a media buying agency who is involved in these ad deals.
Samir Kale, president, Sportz PR, a sports communication consulting firm, which previously managed ESPN’s account, said that India’s poor performance and early exit from the ICC Champions Trophy will hurt ESPN further. “TRPs are expected to fall to below 1% for the remaining matches, bringing down the effective ad rates to around Rs1 lakh. Even its distribution revenue will be down by 30%,” he said. An executive at a rival channel also involved in selling cricket said that ESPN will not be able to make more than Rs80 crore from the Champions Trophy because of unsold inventory and low rates, less than half of what SET MAX made when it had the rights in earlier seasons.
“There weren’t too many takers for the Champions Trophy because advertisers and even the broadcaster are well aware of the risks involved in a knock-out tournament,” said Ajit Varghese, managing director of Maxus, a media-buying agency, which is part of WPP Group Plc’s media specialist company GroupM India Pvt. Ltd. According to him, cricket advertising is no longer the same game it was two years ago, “because there are many safer options now where the risk factor is not as high. Viewership is ensured in twenty-over formats, specifically IPL which is where a large chunk of cricket advertising money is going.” According to GroupM estimates, cricket advertising will add up to Rs1,200 crore in 2009 and IPL will account for an astounding 40% of the total.
The prospects of making up for the lost opportunity during the upcoming Champions League, a world championship for domestic Twenty20 club champions scheduled between 8 and 23 October, also look bleak. The media buyer said that though ESPN has sold nearly 85% of its inventory, the channel is hawking the 10-second spots for as low as Rs50,000 to Rs75,000. The Champions League was cancelled last December because of the Mumbai terror attacks and has been promoted by ESPN and the Board of Control for Cricket in India across media platforms.
ESPN shrugs off any signs of doom. “We are not in a speculative business. There are times India does well and times when the team does badly, so it’s not like viewers will not watch cricket at all and advertisers that have been with us for years will pull out because of one tournament,” said R.C. Venkateish, managing director, ESPN.
Media buyers do not share his optimism. Though ESPN denied any compensatory clause, advertisers and media buyers said that several slots on Champions League are also being offered to existing Champions Trophy advertisers as compensation for the poor ratings delivered by the ongoing tournament. “When we sign deals with ESPN, we do take into consideration a worst-case scenario and there is a clause that if India drops out there is some form of a reimbursement in advertising time,” said an executive of an electronics company that is one of the major advertisers during the Champions Trophy.
This is not the first time this year that ESPN has offered compensatory advertising time—ESPN’s troubles started in June with the Twenty20 World Cup, where India’s dismal performance threw advertisers off-track after they readily signed hefty sponsorship packages because it followed the successful IPL and also because India was the defending champion of the Cup. The poor ratings delivered also began the viewership war between IPL against all other cricket formats in India. “IPL set a new standard not just for cricket viewership but even the size of deals being signed that have dwarfed other tournaments,” said Kale.
The channel, however, has a supporter in Hiren Pandit, managing partner of GroupM ESP, the entertainment, sports and partnerships division of media buying house GroupM.
“ESPN will probably not make money this year but broadcasters take into account such risks and there is an incremental revenue coming in for the channel over the 8-10 year tenure of the deal.” Added Venkateish: “After India lost the Twenty20 World Cup people said cricket was going to die and advertisers were moving out, but this is not true.”