Who could be the ‘drunk sailors’ for IPL media rights auctions after Reliance-Disney merger

New Delhi: The Disney Star-Viacom18 merger is expected to reset the bidding war for the media rights to cricket broadcasting, especially IPL.

In various media interactions following JioStar's formation, its Vice-Chairman, Uday Shankar, voiced concerns about the sustainability of aggressive bidding for cricket rights.

For the 2023–27 season of IPL, BCCI pocketed Rs 48,390 crore from Disney Star and Viacom18.

While Disney Star secured the television rights for Rs 23,575 crore, at Rs 57.5 crore per game, Viacom18 spent Rs 23,758 crore for digital rights.

To set the context, Star India had bought the TV broadcast and digital streaming rights for 2018-22 at Rs 16,347 crore (Rs 54 crore per match).

In effect, the overall price paid for media rights went three times higher in five years.

However, this exorbitant hike is less likely to be repeated with both TV and digital rights holders merging their operations.

The price of only television rights of IPL was almost equal to the valuation of the entire Disney Star during the merger that took place just a year and a half after the IPL auctions.

That is where Shankar’s concern about the sustainability of aggressive bidding stems from. 

While Shankar was cautiously optimistic that the skyrocketing valuations for cricket rights might stabilise over time, he acknowledged the unpredictability of the bidding process. 

“Every time I’ve participated in a bidding war, I’ve hoped sanity would prevail. Yet, every cycle brings a few ‘drunk sailors’ who drive prices higher,” he joked, hoping that the market will correct itself.

When BestMediaInfo.com asked industry stakeholders who could be the ‘drunk sailors’ in the next round of IPL auctions, there were plenty of names but only for digital rights.

“Two major bidders are combined into one, but you still have a Zee and Sony independent. You can also not say that other guys may not come. You may have quick commerce, e-commerce, foreign OTTs like Amazon and Netflix, and players like Nazara Technologies eyeing digital rights. It's all about re-figuring out the market and seeing where it matters,” said Ashish Pherwani, Partner, M&E, EY.

“We are at least two years away from the next IPL media rights auctions, and there could be other mergers or alignments in this period. Hence, the bidder environment will be significantly different within two to three years. Who will be those ‘drunk sailors’ will depend on how much cash they will have at that time. I'm sorry, but I am not able to see the future that far ahead,” Pherwani added.

Ashish Bhasin, Founder, The Bhasin Consulting Group, downplayed the ‘drunk sailors’ factor and emphasised that the moves will be very calculated because you're now talking about billions of dollars. 

However, Bhasin does not think that anybody is going to bid an unsustainable price. 

“I think there is going to be a lot of competitive interest because this is such an important market and because it's growing so high,” he said.

When asked if the last auctions were unsustainable, Bhasin disagreed. 

“If the prices were unsustainable, people would have lost money. When Sony had won the bid, which was at a much lower price, even though it was too high in 2008, it proved to be good. Then when Star bid, which was a very high price by that standard, even that was not an unsustainable price because it did very well with Hotstar and with Star,” Bhasin said.

Highlighting that it would be too early to say anything, Uday Sodhi, Senior Partner and Co-Founder, Kurate Digital Consulting, said, “It's very likely that digital platforms like Netflix and Amazon will enter sports by then. It's also very likely that Sony might want to bid for the rights at that time.” 

However, Sodhi added that if the competition for the IPL rights is limited, it's possible that there could be some moderation to the value, but it's very hypothetical right now. 

Karan Taurani, SVP-Research Analyst (Media, Consumer Discretionary, and Internet) at Elara Capital, also denied the possibility of correction or a drop in the prices. 

“I don't think that there will be a drop. What we saw last time was a significant increase of around 2.5 times higher value in terms of the IPL rights as compared to the earlier cycle. I think in the next cycle, we may not see a drop, but the quantum of growth will be far limited.” 

“Digital is the only growth driver as far as ad revenue and subscriptions are concerned. With consolidation, you may not see bidding there also aggressively beyond a point,” Taurani added.

Taurani predicted that there may be an 80-90% premium on this Rs 50,000 crore number if the number of matches remains similar. 

“If the number of matches increases further, then the premium can be 1.0 to 1.3x as well. But obviously, it's not going to be 2.5x as we saw in the last cycle,” he added.

Talking about his probable ‘drunk sailors’, Taurani said there could be positive surprises from global OTT platforms.

“Sports is something that everybody wants to explore. They have deep pockets, and with the kind of acceptance we have seen for cricket in the non-India markets as well, you know, things are only going to improve from here on in terms of trajectory,” he added.

To set the context, Netflix recently entered live sports streaming with a boxing mega-event involving Mike Tyson. On the other hand, Prime Video has been acquiring sports rights, including cricket tournaments.

“So, Joker in the Pack could be a global OTT giant because they also realise the importance of cricket in the entire portfolio. And that's one segment where they are missing out as compared to the likes of Disney, RIL, and Sony,” Taurani concluded.