IPL bidders get ready for auction amid speculation

Confusion and conjecture surround the media rights auction for the cricket Indian Premier League. There are murmurs that the auction date may be shifted a bit from the earlier one announced for 12 June. Though there is no confirmation on this, potential bidders have queries regarding the four packages that were announced by the Board of Control for Cricket (BCCI) in India for the television and digital media rights.

Meanwhile, broadcasters and streaming platforms that had purchased the tender document are working with close-knit teams to prepare their war chests and bidding strategies.

On all counts, Reliance Industries Ltd-owned Viacom18 is a strong contender. The company has already readied its sports vertical with a 40-member team and a sports channel launched in April. Importantly, Reliance Industries and Viacom18 have entered into a partnership with Bodhi Tree Systems, an investment platform by James Murdoch’s Lupa Systems and Uday Shankar, to bid for IPL. Bodhi Tree Systems is leading an investment of ₹13,500 crore in Viacom18, giving it nearly 40% of the company.

While streaming service Amazon and television broadcaster Sony cannot be taken lightly, Star has made it amply clear that it will bid aggressively for the property, but will not go beyond a number where it stops making economic sense. But what that threshold is, isn’t clear and probably difficult to arrive at with so many bidders equipped for a keen contest.

Yet, the earlier buzz around outlandish final bids going up to ₹60,000- ₹65,000 crore on a combined base price of approximately ₹33,000 crore set by the BCCI, has given way to speculation about a more modest winning price of about ₹40,000 crore lately.

This may be owing to the less-than stellar performance of IPL in terms of viewership. Viewership data of the final match held on Sunday will be out next week, providing a clearer picture on its reach and time spent.

Fortunately, IPL 15’s lower ratings may not have affected the incumbent broadcaster’s revenue to a large extent as the tournament is usually 80-90% pre-sold, according to media buyers. However, a top media buyer said that given the lower viewership this season, the broadcaster may not have been able to charge a premium for the leftover inventory. “Some fence-sitters who buy IPL at the last minute at high rates stayed away this year given the tournament’s performance. That may have resulted in some revenue loss for the broadcaster,” he said, declining to be named.

In the just-concluded IPL season, ad rates for a 10 second spot ranged between ₹15 lakh and ₹18 lakh. A TV network executive said if the cricket property is sold at ₹40,000 crore for five years, the winner would have to sell the advertising spots for ₹50 lakh per 10 second. Besides, hypothetically, at ₹40,000 crore, the per-year cost for the winner comes to ₹8,000 crore, to which another ₹700- ₹800 crore should be added as the cost of production of the tournament. This includes the cost of engaging high-end equipment, cameras, drones as well as equally expensive cameramen and crew, marketing, programming costs and commentators, he said.

The media buyer quoted above agreed that IPL is an expensive property. “But the ₹50 lakh price per spot sounds bizarre. There is a certain amount of price that the market is willing to pay for cricket. The benchmarks are pretty well set. So, it’s not that tomorrow morning, just because you buy it more expensive, the market will give you a higher price,” he said.

Cricket may not be an easy game to get into, “but IPL is still a hot property,” he added.

It clearly gives the TV network which owns it an edge in distribution and hence augmented subscription revenue. It’s a value builder that offers greater clout with advertisers.

In an earlier interview to Mint, Ashish Mishra, managing director, Interbrand India, said that the brand value loss of IPL is led by factors such as fatigue, overdose, sameness, lack of strong franchise brands, disruption in fan engagement and stronger brands in the competition set such as OTT brands.

But it’s nothing that cannot be fixed.