Star India Private Limited, Rupert Murdoch’s television company that operates a clutch of general entertainment, film, news and sports channels in India is betting big on cricket. On Monday, the television network bagged the rights to broadcast all international cricket played in the country for a period of six years beginning July 2012 for a whopping Rs3,851 crore. At Rs3,700 crore, broadcaster Multi Screen Media Limited (MSML) was the second highest bidder at the auction held by the Board of Control for Cricket in India (BCCI).
What surprised many was not why Star participated in the auction but why it raised the bar per match to Rs40 crore up from the Rs31.5 crore that Nimbus Communications was paying before it was kicked out for default on payment.
Here is why. Star India’s chief executive officer Uday Shankar and his advisers probably feel that digitization of the Indian cable television industry will unlock the value of the cricket property the company has purchased at an eye-popping premium. On 19 December, parliament approved the Cable Television Networks (Regulation) Act 2011 clearing the decks for phased digitization of cable television beginning with the four metros – Delhi, Mumbai, Chennai and Kolkata by 30 June – and the entire country by 2014.
The switchover from analogue cable to digital where consumers will access television content only via a set top box is expected to improve subscription revenue for broadcasters beaming into approximately 120 million homes. Subscription fee is what makes television profitable in most parts of the world and with the transparency that digitization is expected to bring, Star hopes to hawk the home series to viewers for a price.
Digitization will expand the Rs20,000 crore cable sector into a Rs50,000 crore market in a few years, according to a study by Media Partners Asia, a Hong Kong based market research firm.
Star probably also understands that Internet is gaining traction. According to global market research agency Ipsos, 103.6 million people in India will go online in 2012. The number of users is expected to more than double to 221.6 million by 2015. Last year, sports broadcaster ESPN was streaming the matches live on its website through a server that could accommodate 5 lakh concurrent users. The site crashed one the second day as more people logged on to watch the game. Although online advertising is still 5% of the total Rs30,000 crore advertising pie in India, it is growing at 30% a year.
Sample some mobile numbers to figure out why Star loosened its purse strings for the mobile rights of the property. Another study by Ipsos says that around 40 million Indians access the Internet through their smart phones and that 56% of the smart phone users in the country access the Internet multiple times a day.
Other surveys reaffirm the findings. India is outpacing other markets in mobile usage. The affluent consumers use their mobiles for 2 hours a day. Increasingly, the device is becoming a dominant medium for accessing entertainment, and news. Star’s move on cricket rights is aligned with the fact consumption of content, especially entertainment, on mobile is set to grow.