How Sony gained from a decade of IPL

As the Indian Premier League grew in size and stature, SPN also gained commercially from the mega sporting event in last 10 years

Raushni Bhagia | Mumbai | March 7, 2017

What is termed as one of the most successful start-ups of Indian television broadcast and the Indian sports sectors, the Indian Premier League (IPL) is said to have reached 4.16 billion USD in 2016. The numbers were estimated by the global valuation and corporate finance advisor Duff & Phelps, as reported by The Economic Times.

IPL, currently in its 10th edition, has flirted with controversies along with its share of popularity. One of the biggest properties on TV, IPL has also been accused of cannibalising sports. It has been criticised for turning cricket into entertainment for commercial gains and at the same time appreciated for making women to watch cricket. Bad name has also come its way with the infamous after-parties and spot fixing row.

So is the high valuation of brand IPL the best thing about it? How much is the broadcaster (Sony Pictures Networks) earning from the telecast? What do the brands gain? Are SPN’s gains confined to the commercial advantages? Has IPL earned anything from the broadcaster, other than eyeballs?

NP Singh

NP Singh, CEO, SPN India said, “In current time, IPL and we (SPN) are gaining from each other. We have invested a lot of time, money and efforts on the tourney to reach this level. We both are enjoying each other’s rub off.”

In January 2008, Sony Pictures Networks took up the broadcast rights of the IPL for 10 years. In 2009, the deal was revised and SPN ended up paying Rs 8,200 crore for IPL’s telecast rights -- considering that each season has 60 matches. As and when the number of matches increased for any particular season -- as that of seasons 4, 5, 6 and 7 -- the broadcaster paid an extra amount on a pro-rata basis, Rs 13 crore per match.

Against this, consider the viewership numbers claimed by the channel, though the numbers aren’t comparable. IPL season one garnered a reach of 102 million, IPL season two clocked 123 million and the recent season IPL 2016 had a reach of 361.2 million.

So what did Sony Pictures Networks India (erstwhile Multi Screen Media) gain from IPL since 2007, when it first took up the baton?

Monies

While advertising is largely the only source of income for SPN in case of IPL, the monies through advertising are pocket full. The high advertising revenues had to wait a couple of years, since the league, initially, was a new format of entertainment; it had a new form of cricket and a newer form of zeal around it. But as people got used to the format, the advertisers started flocking the league, making it a ‘brand-mela’ as much as a ‘cricketing tournament’.

Consider the ad revenue that the network claims to have garnered in the last nine seasons, starting from Rs 400-450 crore in each of the first two seasons, climbing up to Rs 600 crore (season 3) to Rs 750 crore (season 4) and Rs 1,000 crore in season 5. In the next year, Season 6 again saw a dip clocking Rs 800-850 crore, which was maintained till season 8. In the latest season 9 held in 2016, the tourney got Rs 1,100 crore of advertising revenue for the broadcaster.

Even for the upcoming season, IPL 2017, the broadcaster is expecting to churn out about Rs 1,300 crore from the cricket extravaganza. But is it still a high profit making property or just a marginal money making set up? Consider this, for one year, the network has to spend about Rs 820 crore in telecast rights, about Rs 100 crore for production amount and about Rs 10 crore for marketing campaigns – it is close to a Rs 1000-crore investment. Not to forget that distribution too is an important source of revenue, though not as big as the advertising revenues.

Singh agrees, “I feel that IPL has played its role. It has given us reasonable revenues, though not as much as I would have wanted a property of this scale to give. It is also because of the marketing dynamics changed over the years.”

Add-on commercial perks

There are many parallel verticals that also generate monies for the network. To start with, IPL is telecast live for about 27 hours a week on Set Max and Sony Six, along with their HD variants. There is a lot of spill-over programming, which includes the highlights of these matches and the Extra Innings – the match analysis show produced by Sony, especially for the tournament. These properties are also treated lavishly by the advertisers, since sports fanatics do turn up in large numbers for these programmes.

Another hot property is the non-IPL hours of Set Max. Since IPL boosts the distribution of the channel in a huge way, the non-IPL hours of the channel also get spiked viewership throughout the course of IPL. An industry expert said, “I think bringing IPL on the movie channel was one of the best stunts of the network. Since it is a movie channel and movies largely have a universal appeal, viewers ought to check out for the titles running on the channel. This shoots up both – viewership and, hence, ad rates.”

Other than this, even the rates of the other channels are hiked by a marginal percentage, at least for the regular advertisers who buy not specific channels – but the network as a whole. Also, even when Set Max is sold for IPL, the advertisers are forced to buy Sony Six and the HD channels, which have additional rates in the range of Rs 2-4 lakh each. “On a regular day I will not even think of Sony Six and even for IPL, I would not want to buy more than say 20 per cent inventory, compared to what I buy on Set Max, but during IPL, I have no choice. The packages are built in such a manner that Sony Six becomes an important part of the buy and almost in the similar volumes as that of Set Max. Six is sold on a premium too,” said the trading head of one of the agencies who has bought IPL for more than one client.

Strengthening distribution

For long, SPN has had intermittent issues with its distribution network. At the time when IPL hopped on to the SPN bus, the network (then MSM) was struggling to get its distribution together. IPL has stabilised the distribution woes for all the channels of the network since the distribution deals are generally done on the network level.

In addition, none of the multi system operators (MSOs) or local cable operators (LCOs) dare mess with Set Max, especially during the IPL time of the year. Consumers ask for the channel and as digitisation is going to further help the industry to grow as per ‘consumers’ demand’, the channel hosting IPL is not going anywhere.

Singh said, “Yes. IPL did help us stabilise the distribution in the initial few years. Subsequently, as the network grew, we strengthened our distribution. Now, both the tournament and the network are benefiting from each other.”

Perception: The biggest gain

As one senior media planner puts it, “IPL is something that brought Sony back in play. It made them a big strong player in the market. It gives them the bargaining power. Otherwise, channels only call people for business. With IPL, that’s not the case.”

The network has built a perception of being called by the advertiser and not chasing the advertiser down. This has improved SPN’s position in the market because half the time, advertisers call you for something. That helps in getting the max yield.

The stickiness of the channel is built for the whole year, which helps in gaining that extra dollar round the year. “They have built the property and put in efforts initially, yes, but now, they are milking the well-bred cattle,” said a National Trading Head of an agency.

IPL is a popular league across the globe and that’s how SPN India has an identity across these markets. On the back of perception, IPL has been helping in the growth of the sports cluster under SPN. The network now boasts of about nine channels in the sports cluster, while they had none at the time of acquiring rights for IPL.

Singh added, “SPN has put in a lot of effort in building IPL the brand that it is today. The marketing campaigns all these years, along with the wraparound show -- Extra Innings -- and few other things have helped build IPL, which makes it the attractive option for the brands.”

IPL: Biggest promotional platform

In IPL 2016, one could easily spot the promos of the UEFA Euro 2016 being played on the SPN channels. IPL gathers the maximum number of eyeballs in the country, as a single property. Its reach has been unparalleled on TV and that is what makes it the biggest property on television.

This makes it the best possible channel to advertise anything, right from how brands advertise their products and services. The network also promotes its content. Last year, one of the most expensive shows on Sony Entertainment Television, The Kapil Sharma Show, started about 20 days into the IPL and one could spot the innumerable promos that IPL hosted for that show.

Not just SPN, even the other stakeholders take advantage of this. Star Plus (who was an associate sponsor for IPL in the 2013 edition) brought in the characters of its fiction shows in the presentation ceremony of almost all the IPL matches that year! In the same year, Shah Rukh Khan was present in the Extra Innings show of the network to promote his film Chennai Express.

Even in the 2017 edition, FIFA under17 may use the great promotional platform.

It will be interesting to see how much viewership and reach the tournament gathers this year. In addition, the price for the broadcast rights in the upcoming bid will be interesting to watch out for. Since SPN has claimed that the profit margins were not very strong already, will it be more difficult to monetise the property from next season on (as the broadcast rights will only get costlier going forward)?

Singh stated, “Any major investment is very difficult to monetise, so you have to be extremely careful of the numbers you put out. I have always said that we will be aggressive in trying to retain the rights, though we will also be cautious with the experience of last 10 years.”

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