Viacom18’s IPL rights are about much more than merely cricket
PremiumIt could create a bouquet of services to offer customers a so-called ‘rundle’ that its rivals can’t match
In the 1990s and 2000s, when broadcasting of live cricket moved beyond Doordarshan and onto private TV channels, watching a big cricket match live was like attending a get-together. The fun was in the communal experience of the ups and downs of a cricket match watched on a cathode-ray tube TV set. The rise of digital media has in a way killed that. Many of us are now watching cricket all alone on our mobile phones, laptops and even flat TVs.
And this reality is reflected in the fact that the digital rights of the Indian Premier League (IPL) are now as big as its TV rights. Disney-Star will pay ₹23,575 crore for this T20 cricket tournament’s domestic TV rights for the next five years. The Reliance Industries-controlled Viacom18 will pay ₹20,500 crore for the digital rights. In comparison, in the last auction held in 2017, Disney Star had bid ₹16,347 crore to win both the TV and digital rights.
The question is whether these companies will be able to recover their IPL investments. Deepti Chaturvedi and Saurabh Mehrotra, analysts at CLSA, suggest that when it comes to digital rights, advertising revenue needs to grow by a whopping 57% every year for Viacom18 just to recover the money spent on buying the rights.
Karan Taurani and Rounak Roy, analysts at Elara Capital, expect digital rights to break even possibly in the fourth year. The broader view seems to be that Viacom18 might have ended up overpaying for the digital rights, while Disney-Star’s bid price for TV rights is financially viable.
So has Viacom18 overpaid? To answer this question, we need to understand what the marketing professor Scott Galloway calls a rundle, or “a recurring revenue bundle". Amazon Prime, whose members pay a fixed monthly or annual fee, is a fine example of a rundle. As Galloway writes in Post Corona: From Crisis to Opportunity: “Amazon Prime attracts shoppers who want a wide assortment of products with rapid fulfilment. These subscribers also enjoy the benefits of services like Amazon Prime Video, which increase the stickiness of Prime and time spent on the platform." Amazon ends up generating recurring revenue from this.
Galloway feels that Apple could end up doing something similar. As he writes: “Just send me the latest iWhatever with unlimited media (television, games, apps) activated on the good phone at $50 a month, $100 for the better phone plus watch."
Disney could create a rundle which offers “Disney+, parks, cruises, and other perks into several tiers of packages based on recurring revenue." Disney+ is Disney’s over-the-top (OTT) streaming service in the US.
Galloway feels that creating a rundle was a “strategic move before the pandemic—now it’s gangster," given that it leads to a situation where the “revenue is substantially immune to short-term pandemic disruptions and can cover for softness in the core… businesses".
How does this apply to IPL’s digital rights? As per the CLSA analysts, Viacom18’s OTT platform Voot has a market share of just 2%. With the IPL rights in the bag, more people will buy Voot subscriptions. Cricket is a big driver of paid OTT sign-ups in India.
Further, a rundle can be created by bundling mobile phone connections of Jio, also controlled by Reliance Industries, along with different packages of Voot. JioMart, JioSaavn, Reliance Digital and other offerings from the group can also be a part of this package in different ways. This could easily be Reliance’s version of Amazon Prime. Like Amazon Prime offers free delivery of products ordered on Amazon.in, this rundle could also offer free delivery of products ordered on JioMart.
This is likely to be an unbeatable combination of cricket plus a mobile phone connection, which no one else will be in a position to offer. As Galloway writes: “Firms that convince consumers to enter into a monogamous relationship with them are positioned to accumulate more value over time than firms that interact with consumers transactionally."
Also, now that Disney+Hotstar no longer has access to the digital rights of IPL, its subscriptions will fall. It remains to be seen what it will do in the years to come when its other big properties like its rights to other cricket matches played in India (both domestic and international) as well as International Cricket Council rights come up for renewal. Also, Disney+Hotstar runs many popular TV channels and many individuals use OTT to catch up on their favourite programming that they are not in a position to watch at scheduled times. This factor works in favour of Disney+Hotstar and is something which Viacom18 needs to catch up on.
To conclude, just because a Jio+IPL can create a rundle doesn’t mean that this investment will work, given that IPL ratings have been falling for a while now. Also, Viacom18 does not have access to any other big cricket matches other than the IPL’s. But then, it had to start somewhere to be taken as a serious player with some scale in the OTT space and also to create a rundle that people are willing to pay for. In fact, one way to look at this is to compare it with what VC-backed unicorns do to acquire market share—cash-burn. Viacom18 is perhaps doing that by paying so much. Will the strategy work? Let’s wait and watch.
Vivek Kaul is the author of ‘Bad Money’.