Billionaires bet on big-money TV deal for Indian Premier League

Broadcasters and billionaires are predicting a fierce bidding war for the TV rights to the Indian Premier League when they go up for renewal next year, after seeing the high prices paid for two new teams that will join the expanding cricketing competition.

Sanjiv Goenka, the Kolkata-based utilities and retailing tycoon, and CVC Capital Partners, a European private equity firm, snapped up the new franchises late last month, beating out companies owned by billionaires including Gautam Adani, Uday Kotak and Manchester United stakeholder Avram Glazer.

Goenka’s 71bn rupee ($955m) bid for the Lucknow franchise and CVC’s 56bn rupee offer for Ahmedabad represent a big bet on broadcasting rights over the coming years for what is now south Asia’s most popular sporting league. It was the first time a franchise auction had attracted two financial bidders from overseas.

The TV broadcasting contract, currently with Disney-owned Star India, ends next season, and the next iteration is expected to generate far higher offers than Star’s winning bid in 2018. The 162bn rupees that Star paid for the five-year contract was almost four times what Japanese rival, Sony Sports, paid — 82bn rupees — to screen the first 10 years of the league in 2008.

Around 400m people have tuned in to at least one match during the past few seasons, according to Star India — no small feat given the persistent disruptions from Covid-19 in 2020 and 2021. The last two competitions have been held largely in the United Arab Emirates and the 2021 season had to be paused midway for four months. It wrapped up only on October 15, with a win for the Chennai Super Kings, a team owned by construction industry giant India Cements.

“The valuation of IPL teams has gone up substantially as seen in the recent auction and there is going to be inflation in broadcasting, too. I am expecting at least three large players to be in the race and bidding will be extremely intense. I expect bids for broadcasting rights may double and are expected in the range of 400bn rupees to 450bn rupees,” said Harish Bijoor, a brand strategist, implying a doubling of the value of the rights.

Sony could be bidding together with Zee Entertainment Enterprises, if they succeed in merging their India businesses as planned. Star is also expected to bid for the rights again. Other companies, including TV18 Broadcast, owned by billionaire Mukesh Ambani, are also keen to get into new businesses.

Facebook, which made a bid for digital-only rights in 2018, is likely to be in the mix again. Its $600m (39bn rupee) offer for digital rights was rejected in favour of Star’s joint offer for both TV and digital rights.

The new franchises expand the IPL to 10 teams for 2022, which begins in March, meaning the season will swell from 60 to 74 matches.

The IPL’s four-hour cricket format was an instant success when it launched in 2008, with billionaire glitz and celebrity glamour. Reliance Industries’ Mukesh Ambani, JSW Group’s Sajjan Jindal and Wadia chair Nusli Wadia have been among the investors in the league’s teams, along with Hindi movie stars such as Shah Rukh Khan and Preity Zinta.

Billionaires bet on big-money TV deal for Indian Premier League

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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For India’s cricket-crazy fans, layering on film stars and cricket legends together amounted to a new version of reality TV. Lalit Modi, the man who started the league as its founder and commissioner, was lauded for bringing the warring cricket administrators of various states together and providing a new money-spinning vertical for the Board of Control for Cricket in India, or BCCI, which was looking for ways to support domestic cricket.

Controversies came early: allegations of match-fixing, government investigations into team financing, and claims of misconduct that led to Modi being banned from the BCCI for life, though he denied the claims and no charges were proven in court. But nothing has dented the IPL’s popularity or its ability to lure top players from around the world.

Or for that matter, its ability to attract sponsorship and advertising. Matches give instant brand recognition to companies trying to establish themselves in the Indian market. Most of the top sponsors of the IPL are relatively young companies such as Chinese telephone handset maker Vivo, online teaching firm Byju’s, online gaming company Dream11 and Paytm, the digital payments start-up that has just completed India’s largest initial public offering.

Vivo pulled out of IPL’s 2020 season over rising border tensions between India and China but returned in 2021. Just weeks after Dream11 paid 2.2bn rupees for the IPL title sponsorship in 2020, it raised $225m from investors led by Tiger Global Management.

Duff and Phelps, a management consultancy, estimated in March this year that because of the Covid pandemic, which hit ticket and food sales and introduced costs for keeping players in a virus-free bubble, the value of the IPL ecosystem, including the franchisees and the governing body, dropped by 4 per cent to 458bn rupees in 2020 from 475bn rupees in 2019. Of the teams, Mumbai Indians remained in the top spot of the brand rankings for the fifth consecutive year, with a brand value of 7.6bn rupees, down 6 per cent from 2019.

The auction of the new franchises suggests that a rebound in valuations, which began with the delayed start of the 2020 season, has gathered pace. It implies that top-tier teams — such as the Chennai Super Kings and Mumbai Indians — could hit “unicorn” status, or a value of more than $1bn each.

Based on the prices paid, Motilal Oswal Financial Services, a Mumbai-based brokerage firm, tipped shares of United Spirits, a listed subsidiary of Diageo which owns the Royal Challengers Bangalore team. The Royal Challengers, which finished third on points in the league this year, are led by Indian national team captain Virat Kohli.

“Even if we benchmark RCB’s valuation to the new Ahmedabad franchise as a base case, there is a potential upside of nearly 10 per cent from United Spirits current market capitalisation,” said Motilal Oswal analyst Krishnan Sambamoorthy.

At least one billionaire thinks Goenka and CVC paid too much. “I think the bids are very high,” said the Mumbai-based executive, who is an advertiser in IPL, asking not to be identified. He pointed out that in 2008, the first eight teams were sold for a total of 29bn rupees with the highest bid for Mumbai Indians made by Ambani at 4.47bn rupees.

“We think the Lucknow franchise will make losses of 36bn rupees in the first 10 years,” he said. “And that it will break even in 22 years.”

Naysayers are not denting Goenka’s enthusiasm, however. The billionaire said he will get back half of what he paid within a decade, from ticket sales, team and event sponsorships and the Lucknow franchise’s share of the new broadcasting rights deal.

Goenka and CVC must pay the total of their winning bids to the BCCI in equal instalments over the next 10 years. BCCI, in return, will pay half the money received from broadcasting rights and sponsorships equally to the 10 teams.

“The net difference between what we get and what we pay to the BCCI as license fees will be half . . . what we have to pay the BCCI in the next 10 years,” Goenka told a TV channel.

Jay Shah, honorary BCCI secretary and son of India’s home minister, Amit Shah, promised to make the next IPL season far “bigger and better”’ by adding new franchises.

“Despite numerous challenges posed by Covid-19, the 13th and 14th seasons were completed, and the bids prove that the interested parties have faith in the BCCI and its hosting capabilities,” he said.

version of this article was first published by Nikkei Asia on November 16. ©2021 Nikkei Inc. All rights reserved.

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