Thread by @KShriniwasRao

Okay, here’s today’s #thread. It’s on the next cycle of #IPL broadcast rights.
We’ve been hearing a lot of people say IPL’s new media rights revenues will crash through the roof. Some said it’ll go past Rs 35k cr, will touch Rs 40k cr. How about dissecting these figures. (1/25)

Why will the IPL broadcast rights revenues touch these figures? Star India (now Disney) bought IPL rights at Rs 16,347 cr for 2018-2022 (5 yrs) cycle. Now, if we’re saying value will go past 35k cr, are we seeing everything double up? (2/25)

For instance, are number of TV or OTT subscribers going to double? Are subscribers going to pay double of what they’re paying right now? No! Then why is it that rights value will double up? Remember, presently we have 60 IPL matches. It’s not like they’ll become 120. : ) (3/25)

Let’s try and dissect this. I’m a 90s kid. Don’t know how many here have known what it meant to watch sport on Doordarshan until the 80s. Grainy B&W videos, govt ads, rare FMCG ads. Remember, I could never see Sunil Gavaskar’s face clearly on my TV screen. (4/25)

I would go close to TV screen as a kid, stick my nose to it and see if I could see Sunny bhai’s face from under that floppy hat. My mom would yell. Anyways. So, when cable TV first came in 90s (with the rise of Tendulkar’s career), it came like a fresh breath of air. (5/25)

Suddenly, we (90s kids) found ourselves watching good, clear videos of football in UK. Ask any youngster from those years, he / she will tell you 1992 Cricket World Cup (under lights in coloured clothing) is the best they ever saw. The freshness of cable TV was amazing. (6/25)

Cable TV ran on two revenue streams. Ads – that came from FMCG companies. Distribution platforms – that began gaining root across the length and breadth of the country. Any use of internet from content perspective was still a good 10-12 years away. (7/25)

Post turn of century, internet came. Nobody knew how to monetize internet. But ads began to go online from TV & print. Advertisers paid per click. Economy was booming. I remember a cricket website back in 2002-03 that spent millions to generate good content from the game. (8/25)

Meanwhile, cable gave way to dish – Tata Sky, Dish TV. Distribution got streamlined a bit. Through 90s, cable theft was serious. Dish made it disappear to some extent. Array of channels opened because uplinks became easy. However, revenue models more or less remained same. (9/25)

It was only with arrival of ‘internet subscription’ model that these revenue models would change again. If Netflix or Prime could allow me to watch ‘DDLJ’ or ‘3 Idiots’ whenever I wanted, why would I wait for Tata Sky to show it to me on a Sat or Sun evening at 7 pm? (10/25)

Appointment viewing was dying (or was already dead). Traditional (linear) broadcast was giving way to internet-dictated broadcast and that meant that people would no longer be dictated by the medium. They would dictate the medium. So, they started subscribing. (11/25)

Internet subscriptions began eating into ad & distribution revenues. ‘www’ became a market disrupter. But in all this, there was only one constant – Live sport wouldn’t succumb to these diktats. Remember – live sport is the last and final bastion of appointment viewing. (12/25)

Why? Unlike a ‘DDLJ’ or ‘3 Idiots’ which you can watch whenever you like on OTT, you can watch live sport only at the appointed hour. The T20 final will begin at 7.30pm IST. That’s when you’ve got to watch it. You can’t choose your time. That’s appointment viewing. (13/25)

In that, TV – at least in Tier-1 & Tier-2 India is still alive. I’m not saying TV in India will perish anytime soon. India is a very different country from rest. TV is going to stay here for the next 20-25 years (like print). But what I’m sharing is the bigger picture. (14/25)

So, live sport is what makes TV tick to a large extent. Otherwise, internet / OTT is taking over everything. Now, let’s cut to Star’s Rs 16,347 cr bid for IPL rights for 2018-22 cycle. How much of that they paid for digital rights? They never shared that figure. (15/25)

So, we’ll go by market figures. Facebook made an unsuccessful bid of Rs 3,900 cr the same year for IPL digital rights (and lost) and Sony made an unsuccessful bid of Rs 11,500 cr for TV rights alone (and lost). Why? Because Star put a consolidated number. (16/25)

But look at these figures individually. Facebook’s Rs 3,900 cr five years ago would have scaled up by how much now? Take the pandemic into consideration too, where OTT platforms have massively picked up. Let’s assume a basic jump of two-and-half times (Rs 9,750 cr). (17/25)

Digital economy has jumped like crazy. Look at e-education, e-retail platforms driving advertising spaces. Sony’s Rs 11,500 cr TV-bid, on the other hand, could go up by 25% (market indicator) given the TRAI hikes, subscriber interests, etc. That’s approx. Rs 14,000 cr. (18/25)

So, the basic Rs 14,000 (TV) + Rs 9,750 (digital) throws up a figure of Rs 23,750 cr. Remember, I’ve not added anything to this – no rise in number of matches, inflated pricing, future tech at work, market innovations, clearer distribution models. Absolutely nothing. (19/25)

Now, look at number of matches. Presently IPL has 60 matches a year. It’ll go up to 74 next year. 94 following year. Star pays IPL Rs 54.5 cr per game (for 60 games). Do the math for 94 games (at today’s value) & then compare it to the above changes in industry landscape. (20/25)

94 matches per season is way forward. So, that’s straight 34 matches up from 60. So, that’s a straight Rs 1,853 cr hike per season, which is approx. Rs 7,500 cr for four years (14 extra matches in 2022 season excluded). That takes the rights value to approx. Rs 32,000 cr. (21/25)

Now, add competition to it. Disney, Amazon, Viacom, Sony, Zee – they’re all lining up. They’ve all requested their respective parent boards to loosen purse strings for IPL. Why? Because no other property in India engages with consumers like IPL does. (22/25)

If there’s an e-auction, remember, competition will drive up and components like market commitments, egos, consumer engagement, etc will come into play. That’ll drive the value even further. And finally, there’s the e-retail market to look at. (23/25)

Let’s take Amazon for example. If they bag rights, a consumer will probably pay Rs 100 for Prime subscription to watch IPL. But what if Amazon says “okay, I don’t want your 100 Rs. Watch the cricket for free. Just buy the TV from me.” (24/25)

E-retail is the next big thing and expect the competition there to play a huge role in driving up the prices. That’s why the value of IPL media rights is expected to go beyond Rs 35k cr and probably touch Rs 40k cr. Engaging with cricket fans is serious business. (25/25)

Tweet 20: The number of matches could gradually go up 72 in 2022, 84 in 2023 & 94 in 2024. What I've tried to explain in this thread is a big picture of sorts. How the formula is likely to work... pls don't treat it with specifics.