Published on 24/06/2022 12:51:17 PM | Source: ICICI Direct

Media Sector Update - IPL rights auction rakes in big moolah By ICICI Direct

Posted in Broking Firm Views - Sector Report| #Media Sector #Sector Report #ICICI Direct

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IPL rights auction rakes in big moolah!!!

The much awaited IPL rights for 2023-27 concluded, fetching | 48.390 crore to the BCCI. The winning bid total amount, as expected, was 3x of last cycle cumulative winning bid of | 16347.5 crore. Disney Star, which holds global IPL media rights till 2022, retained the television rights for the Indian-sub continent, while Viacom18 won digital rights for the India, Australia, South Africa and the UK and non-exclusive digital media rights for 18 matches, ring fencing the digital rights exclusivity. Times Internet won the digital rights for the Middle East and North Africa (MENA) region and the US.

Key highlights of auction

* Disney Star, which holds global IPL media rights till 2022, retained the television rights for the Indian-sub continent in Package A with total payout at | 23575 crore.

* The Viacom18 won digital rights for the India in Package B. Viacom18 also won Package C comprising non-exclusive digital media rights to 18 matches. In Package D, which includes TV and digital rights for the rest of the world, Viacom18 got Australia, South Africa and the UK. Viacom18 payout stood at | 23757.5 crore. Times Internet won the MENA region and the US TV and digital rights with a payout of | 1058 crore.


Disney – retention to maintain TV sport broadcasting leadership

We see Disney Star bid, more as a bet to maintain TV sports broadcasting leadership, than as a pure economic gain. We highlight that various media reports peg IPL 2022 TV revenues at | 3700-3800 crore, with ad being 80% of the mix. At this base, we believe Star would need ~12% ad revenues CAGR over the next 5 years coupled with 5% subscription revenues CAGR over the same period, to simply break even the bid cost and production expenses. Most importantly, waning TV viewership of IPL (2022 season saw decline in viewership by ~30%), makes the ability to scale up ad rates as well as subscription a challenge, going ahead. Other key monitorable would also be how the government’s guidelines to curb surrogate advertisement of alcohol and online betting, impact overall ad volume.


Viacom 18 to target Voot viewership boost akin to Hotstar …

Viacom 18 bid for digital rights ought to be seen in the light of relative weak positioning of Voot in the OTT space, so far, and the available historical anecdote of Hotstar in India riding on IPL, which has now 50 mn+ paid subscriber and forms more than 36% of total Disney+ global subscriber base of 137.7 mn. In contrast, Voot Select paid subscription base had hit 1 paid mn subscriber base in FY21. Thus, the scalability option is huge with IPL digital rights exclusivity, and also given the strong distribution landscape of its group company Jio’s 410 mn+ wireless and broadband subscribers. Furthermore, interactive features on digital platform also provide higher potential of monetisation. Nonetheless, profitability may still be a long shot, as 2022 digital IPL revenues (subscription+ advertisement) has been pegged at | 2200-2400 crore by various media reports. Thus, at such as base it warrants ~25%+ CAGR for next 5 years, just to break even.


Zee-Sony avoid possible “winners curse”; Sun TV’s Sunrisers Hyderabad to gain

We highlight Zee-Sony post auction comments suggest that they have gone for fiscal prudence. However, we note that with a vision to scale up sports offering, we expect them to bid for ICC and BCCI rights when they come for renewals in next 2 years. Meanwhile, in the near term, we expect them to build OTT strategy on entertainment (series/movies) and regionals slate. Nonetheless, not being able to win may have resulted in avoiding possible “winners curse” which seem likely as of now.

The key winner in the overall bid process would be BCCI and the franchisees which stand to gain higher annual revenues. Note that out of central pool, BCCI pays out 50% of rights money to franchisees (including 5% as prize money). Thus, this higher bid will likely result in incremental | 250- 300 crore of annual revenues for each teams from FY24 onwards, including Sunrisers Hyderabad, owned by Sun TV. The bottomline economics will be determined by how the cap on players’ salaries (currently at | 80 crore) and other expenses changes for the franchise, given the higher revenues availability


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