In the 1990s and 2000s, when the broadcast of live cricket moved beyond Doordarshan and onto private TV channels, watching a big cricket match live was like attending a gathering. 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 kind of put an end to it. Many of us are now watching cricket 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 crores for the next five years for the domestic TV rights of this T20 cricket tournament. Viacom18, controlled by Reliance Industries, will pay 20,500 crore for digital rights. In comparison, Disney Star had bid at the last auction in 2017 16,347 crore to win both TV and digital rights.
The question is whether these companies will be able to recover their IPL investment. CLSA analysts, Deepti Chaturvedi and Saurabh Mehrotra, suggest that when it comes to digital rights, there is a need for a 57% growth in advertising revenue for Viacom18 every year, to offset the money spent on buying the rights. recovery can be made.
Analysts Karan Taurani and Raunak Roy at Elara Capital expect digital rights to end in the fourth year as well. The broader view appears to be that Viacom18 may have paid more for the digital rights, while Disney-Star’s bid price for the TV rights is economically viable.
So has Viacom18 paid more? To answer this question, we need to understand what marketing professor Scott Galloway calls a rundle, or “recurring revenue bundle.” Amazon Prime, whose members pay a fixed monthly or annual fee, is a good example of a Randall. As Galloway writes in the Post Corona: From Crisis to Opportunity: “Amazon Prime attracts shoppers who want a wide assortment of products with fast fulfillment. These customers also enjoy the benefits of services like Amazon Prime Video.” which reduce the stickiness and time spent of the Prime platform.” Amazon generates recurring revenue from this.
Galloway thinks Apple may be doing something similar. As they write: “Just send me the latest iWhatever with unlimited media (television, games, apps) activated for $50 per month on good phones, $100 for better phones plus watch.”
Disney could create a group that “offers Disney+, parks, cruises and other features in multiple 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 mob was a “strategic move before the pandemic – now it’s gangster,” noting that it leads to a situation where “revenue is sufficiently immune to short-term pandemic disruptions and Softness in the core could cover for … professions”.
How does this apply to the digital rights of IPL? According to analysts at CLSA, Viacom18’s OTT platform Voot has a market share of just 2%. With IPL rights in the bag, more people will be buying Voot subscriptions. Cricket is a big driver of paid OTT sign-ups in India.
Also, a rundl can be made by bundling the mobile phone connections of Jio, controlled by Reliance Industries, with various packages of Voot. JioMart, JioSaavn, Reliance Digital and other offerings from the group can also be part of this package in different ways. This could easily be Reliance’s version of Amazon Prime. Just like Amazon Prime offers free delivery of products ordered on Amazon.in, this Randall can also offer free delivery of products ordered on JioMart.
It is likely to be an unbeatable combination of cricket and mobile phone connection that no one else will be in a position to offer. As Galloway writes: “Firms that persuade consumers to enter into a monogamous relationship with them are positioned to accumulate more value over time than firms that transact with consumers “
Also, now that Disney+ Hotstar no longer has access to the digital rights to the IPL, its membership will be reduced. It remains to be seen what it will do in the coming years when other large assets such as the rights of the International Cricket Council (ICC) along with other cricket matches (both domestic and international) are played in India. Come for renewal. Also, Disney+Hotstar runs many popular TV channels and many people use OTT to catch their favorite programming which they are not in a position to watch on schedule. This factor works in Disney+Hotstar’s favor and is something Viacom18 needs to catch up on.
Lastly, just because a Jio+IPL can create a stir, doesn’t mean that this investment will work, given that IPL ratings have been falling for some time. Also, Viacom18 does not have access to any major cricket match other than the IPL. But then, it had to start somewhere to take it as a serious player with some scale in the OTT arena and also create a sequence that people are willing to pay for. In fact, one way to look at it is to compare it to what VC-backed unicorns achieve market share-cash-burn. Viacom18 is probably doing this by paying that much. Will the strategy work? Let’s wait and see.
Vivek Kaul is the author of ‘Bad Money’.