IPL rights winners might take 4 yrs to bridge gap between price and revenue

The bubbly might not flow freely at the winners of this week’s auctions of the broadcast rights to the Indian Premier League (IPL), the party pooper being a possible four-year gestation before they bridge the gap between the price per match and the advertising revenue.

The Indian cricket board raised eyebrows when it auctioned the 2018-22 broadcast rights for the IPL to STAR India for Rs 16,347.5 crore — for every medium and geography. That was 158 percent higher than what Sony had paid for the previous cycle. This week, the BCCI hit the ball out of the ground by auctioning slices of the rights to three entities for a total of Rs. 48,390 crore for the 2023-27 IPL cycle.

The auctions place the price per match at at least Rs 118 crore if you simply divide the total amount by the 410 matches to be played in the five-year period. The amount goes up to Rs. 140.7 crore a match if you divide the amount paid for every package by the number of matches under each.

An analysis of the 2022 IPL season shows STAR earned Rs 58.1 crore per match from advertisements. The total earning would be more than this because revenue from spot ads are not available. There would also be an increase in subscription revenue, both digital and television, because of the IPL.

However, it might still turn out to be a steep revenue run chase for the rights holders to bridge the chasm. It does not augur well for them that the advertisement income fell in 2022 compared to the previous year, though the eight-year period to 2022 saw a compound annual growth rate, or CAGR, of 19.6 per cent. In 2015, the advertisement income was just Rs 16.7 crore a match. 
 

A back-of-the-envelope calculation shows that at the same CAGR broadcasters would need four years for the advertisement revenue to catch up with the price of Rs. 118 crore per match. Reports of falling viewership will not help matters: data from BARC shows IPL viewership fell 25 per cent this year.

What will give the rights winners succour is predictions that IPL audiences will grow steadily and its brand burnish further with time. Brand Finance says brand IPL saw a 7 per cent increase in 2021 after a decline of more than 20 per cent in the Covid-infected year of 2020. Still, at $4.7 billion, IPL’s brand value is 23.7 per cent higher than in 2017.

Broadcasters also have other means to bridge the gap between price and income. Advertisement revenues are one slice of the pizza, though a rather large slice. Subscription is another. Data from STAR India’s regulatory filing for 2020-21 shows it made Rs 4,670 crore from subscriptions in 2020-21. Even if only 30 per cent of it came from the sports category, the company would have made Rs 1,400 crore from sports-driven subscriptions.

Another factor is cross-selling, which is how broadcasters leverage a property on one of their channels to drive advertisement on another. With new teams added and the IPL trying to break into Tier-II markets, there may be more comfort for broadcasters. But is that comfort enough to uncork more bottles this weekend?