FINANCE

Billionaires bet on big money TV deals for the Indian Premier League


Broadcasters and billionaires are predicting a fierce bidding battle for TV rights in the Indian Premier League as they see higher prices paid for two new teams that will re-enter cricket competition next year.

Kolkata-based utility and retail tycoon Sanjeev Goenka and CVC Capital Partners, a European private equity firm, snatched new franchises late last month, with owner stakeholders including Gautam Adani, Uday Kotak and Manchester United. .

Goenka’s Rs 71 billion ($ 955 million) bid for the Lucknow franchise and CVC’s Rs 56 billion offer for Ahmedabad represent a big bet on broadcasting rights in the coming years which is now the most popular sporting league in South Asia. This is the first time a franchise auction has attracted two financial bidders from abroad.

The TV broadcast deal, currently with Disney-owned Star India, expires next season, and the next iteration is expected to generate far more offers in 2018 than Star’s winning bid. Of the 16 162 billion that Star paid for the five-year deal, almost four times more than the Japanese rival Sony Sports – Rs 82 billion – to screen the first 10 years of the league in 2008.

According to Star India, nearly 400 million people have participated in at least one match in the last few seasons – no small feat in 2020 and 2021 due to the continuous disruption from Covid-19. The last two competitions were held mainly in the United Arab Emirates. Emirates and the 2021 season had to be interrupted for four months. It only ended on October 15, with the victory of Chennai Super Kings, a team owned by construction giant India Cement.

“As seen in the recent auction, the valuation of IPL teams has increased significantly and there is going to be inflation in broadcasting as well. I hope at least three big players will be in the competition and the bidding will be very intense. I hope the bid for broadcasting rights will double and is expected to be between Rs 400 billion and Rs 450 billion, “said Harish Bijur, a brand strategist, pointing out that the value of the rights has doubled.

Sony G Entertainment may bid together with Entertainment Enterprise, if they succeed in consolidating their Indian 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 on new ventures.

Facebook, which only made a bid for digital rights in 2018, will probably merge again. Its m 600m (Rs 39bn) offer for digital rights was rejected in favor of Star’s joint offer for both TV and digital rights.

The new franchises have expanded the IPL to 10 teams for 2022, starting in March, which means the season will swell between 60 and 74 matches.

The four-hour cricket format of the IPL, with billionaire Glitz and celebrity glamor in 2008, was an instant success. Among the investors in Reliance Industries’ Mukesh Ambani, JSW Group’s Sajjan Jindal and Wadia Chair Nusli Wadia League teams are Hindi film stars like Shah Rukh Khan and Preity Zinta.

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

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For cricket-crazy fans in India, a new version of reality TV bringing together film stars and cricket legends. Lalit Modi, who started the league as its founder and commissioner, was praised for uniting warring cricket administrators in different states and for 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. .

Controversy erupted: allegations of match-fixing, government investigations into party financing and allegations of misconduct that led to Modi being banned from the BCCI for life, although he denied the allegations and no allegations were substantiated in court. But nothing has tarnished the IPL’s popularity or its ability to lure top players around the world.

Or about that, the ability to attract sponsorship and advertising. The 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 education company Byju’s, online gaming company Dream11 and Paytm, a digital payment start-up that has just completed India’s largest initial public offering.

Vivo withdrew from the IPL’s 2020 season due to growing border tensions between India and China but returned in 2021. Just weeks after Dream11 paid Rs 2.2 billion for the 2020 IPL title sponsorship, it raised $ 225m from investors led by Tiger Global Management.

Duff & Phelps, a management consultant, estimated in March this year that due to the Covid epidemic, which hit ticket and food sales and introduced costs to keep players in a virus-free bubble, the value and governing body of the IPL ecosystem, including the franchise From Rs 4 billion to Rs 458 billion in 2020. Among the teams, Mumbai Indians topped the brand rankings for the fifth year in a row, with a brand value of Rs 7.6 billion, down 6 per cent from 2019.

The auction of new franchises suggests that a rebound in valuations, which began with the delayed start of the 2020 season, has gained momentum. This means that top-tier teams – such as the Chennai Super Kings and the Mumbai Indians – could have “unicorn” status or more than $ 1 billion each.

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

“Even if we benchmark RCB’s valuation for the new Ahmedabad franchise as a base case, United Spirits could potentially surpass about 10 per cent of its current market capitalization,” said Motilal Oswal analyst Krishnan Sambamurthy.

At least one billionaire thinks that Goenka and CVC have paid a lot more. “I think the bids are too high,” the Mumbai-based executive, an IPL advertiser, said on condition of anonymity. He noted that in 2008, the first eight teams were sold for a total of Rs 29 billion and the highest bid by Ambani for the Mumbai Indians was Rs 4.47 billion.

“We think the Lucknow franchise will lose Rs 36 billion in the first 10 years,” he said. “And it will break in 22 years.”

The Nasayaks, however, are not eroding Goenka’s enthusiasm. The billionaire says he will get back half of what he paid in a decade from the Lucknow franchise’s share of the ticket sales, party and event sponsorship and new broadcasting rights agreement.

Goenka and CVC must pay the total amount of their winning bid to the BCCI in equal installments over the next 10 years. The BCCI, in turn, will give the 10 teams equal broadcasting rights and half of the proceeds from the sponsorship.

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

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

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

A Version of this article First published by Nikkei Asia on 16 November 21 2021 Nikkei Inc. All rights reserved



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