Star India may earn Rs 3,500 crore as profit in five-year IPL broadcast deal

Star India could potentially rake in around Rs 3,500 crore as pure profits through its five-year-long IPL telecast deal as the market analysts are expecting that the property will turn profitable starting the 2020 season.

During the recently concluded season (IPL11), Star India is estimated to have made a total revenue of Rs 3,000 crore, which included Rs 1,800 crore from advertising (TV and digital), and Rs 600 crore from distribution and international rights each.

The total revenue growth recorded during IPL 11 was 35% more than IPL10. Market observers and sports analysts believe that the average growth over next four seasons would be in the vicinity of 20% y-o-y, at least. Star had bought the broadcast rights for all platforms, including digital and international rights, for a period of five years (2018-2022) for Rs 16,347 crore.

It is estimated that the broadcaster’s extra investments of Rs 500 crore every year is being made on programming and production, which means it will spend a total of Rs 2,500 crore towards broadcasting for the five seasons. The total investment being made by Star on IPL over a period of five years will then be in the vicinity of Rs 18,850 crore, which means investment in every season is around Rs 3,770 crore. Considering the market estimates of Rs 3,000 crore revenue this year, Star lost around Rs 770 crore in year one of broadcast and could lose Rs 170 crore in IPL12, it could potentially break even and make a profit of Rs 550 crore in season 13 (in 2020) which may increase to Rs 1,410 crore in season 14 and to Rs 2,246 crore for the final season (IPL15 in 2022) of the broadcast deal. The total ROI on the investment of Rs 18,850 crore is likely to be 19%. "Growing at the pace of 20% a year on average, Star may clock total revenues of Rs 22,316 crore directly from IPL over a five-year period," said a market observer. He said that indirect benefits from IPL, such as increased penetration, would be counted separately.

The Growth Drivers

The real growth for the network could come from the digital ad revenue which could grow in the region of 50% for the next two-three years, before slowing down in the last season. Star has witnessed a massive increase in viewership on its digital platform Hotstar, which it is yet to get monetised to its full potential. "With cheap data, digital will drive the viewership as it will penetrate more into rural areas. TV's viewer growth is likely to remain stable in the region of 15% and could be more if Star adds more regional languages and decides to broadcast IPL on its movie channel," another market analyst said.

The channel will also utilise its non-live properties better that will tickle in revenue throughout the year. It must be remembered, that barring the finals, Star kept IPL11 as a pure sports property in Hindi market as it was telecasting the cricketing event only on Star Sports.

"The network has tried to build a lot of properties around IPL and these surround programming will ultimately earn money for the network round the year. They have plans to extend the locker room, non-live, team-centric programming to the whole year, making it a weekly affair. This will be a huge step in building IPL following too, along with the advertising monies, which will go on increasing year on year,” said a sports broadcast veteran.

The broadcaster could also get more premium on its TV advertising rates, which it traded for around Rs 10 lakh for 10 seconds in the last season. The reason for getting more premium, experts believe, could be the way Star is treating IPL. The network is relying less on entertainment and more on serious cricket to reposition the IPL, which was treated more of an entertainment property by previous broadcaster Sony. A broadcast industry veteran said that adding more regional feeds can also fuel revenues.

"It is also the trust that the network has built by portraying IPL the way it has, bringing more respect to the game and to the sportsmen. Having said that, the network did attempt at asking for a 25% increase in the ad rates for the tournament. Just as the finals this year, if it decides to bring the whole season of IPL back on the Hindi entertainment genre (GEC or movie), then the reach will hit the expectation point, else, it might have to make more efforts," the broadcast industry veteran said.

"Also, last season's finale witnessed inclusion of two more languages, Marathi and Malayalam. The initial reports said that IPL has dropped its reach the most in Delhi and Mumbai. With the launch of Marathi feed, if it is included right from the start in the next tournament, it will help boost the reach tremendously. Regionals are getting more monies than ever before, right now," he added.

The sales team of Star India is being appreciated for being able to convince advertisers about the performance of the tournament, and sell the property at such a premium even when it was in its 11th edition.

A lot of media planners and buyers say that while the increase in IPL ad rates had been restricted to 7-10% y-o-y in the previous years, this year it went up to 20% in some cases. The programming innovations of the network with Select Dugout and non-live stunts were also well appreciated, including the panel of over 100 commentators. However, the marketing campaign, though it was a good insight, was not seen much.

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