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How will Viacom18, Star and Times Internet monetize the IPL?


Making money from IPL rights. How far will advertising carry Viacom 18, Star and Times Internet?

Over 200 million viewers, and the second most valuable sports franchise in the world. This is what Viacom18—majority-owned by Reliance Industries—and Disney Star now have. And they paid a pretty price for the rights—Rs 48,390.32 crore, including what Times Internet paid for the rights to stream the franchise in some foreign markets.

So how will they ensure a return on that investment in five years? 

Ads: The most obvious answer is what sports franchises everywhere in the world have always been doing: air ads. Ads on the stream, ads on the TV broadcast, ad breaks, mid-roll ads, and so on. With Indian sports fans’ eyeballs not being worth as much on average, expect a lot more ads, unless you’re willing to cough up a premium to avoid them. 

But who will be buying these ads? Remember, each match is worth well over Rs 100 crore, and advertisers will need high marketing budgets, or an Indian economy that is humming to participate, or both preferably at IPL ad rates. While the IPL has managed to attract a lot of the venture capital and private equity-backed unicorns (the kinds we cover everyday here at Entrackr) disproportionately, the future might require an even higher volume of freshly funded firms with massive ambitions who see value in the IPL proposition. So not just more of the same, but a lot more of the same. 

Keep in mind that things can change very quickly here, too. Consider how gaming apps, which seemed to carry the IPL in 2022, may not even make an appearance next year, if the latest diktat by the government barring advertising by betting apps is applied to fantasy gaming and other financially risky platforms. Ditto for Crypto firms, who have all disappeared as advertisers already, after making a splash last year. 

And then there is the digital story. Consider this. Viacom18 has paid more for the streaming rights of the IPL than Disney has paid for the telecast rights. In addition to that being a pretty bold bet for the volume and buying power of people who will be viewing the tournament online, it is also a good opportunity for slicing and dicing users and serving targeted ads during ad breaks. That requires some tech investments, which Viacom18 has a year to implement. It also requires a little more data on viewers to increase the value of the targeted ads. Jio will presumably aid on that front, with its 360 million odd active subscribers. 

Telecom distribution: The Reliance group’s Jio in fact, brings a massive distribution advantage over any other broadcaster. To understand how this advantage can be wielded, look no further than current prepaid tariff pricing. Jio and its competitors all offer 4G internet at some of the lowest prices in the world. They often grumble about ARPU being low. 

Jio has headroom to hike tariffs in preparation for bundling IPL access for its millions of subscribers. The telecom industry wants another hike in tariff prices so that ARPU goes up to Rs 200 per user per month, and Jio should be more than happy to lead, now that they have a huge franchise to monetize.

Jio has had a much more comfortable history of raising capital for its business due to various reasons. As such, every rupee it earns translates into more profit for Reliance than is the case for Vi and Airtel. So when it ends up bundling IPL with prepaid and postpaid plans come IPL season, it won’t have to hike prices all that much. 

And then there’s JioFiber. In a mysterious statement, Viacom18 said that the company “will make IPL available to every Indian in every part of India, including the 60 million FreeDish homes which today are not able to access this popular content.” A bold claim to make for a digital rightsholder. But JioFiber has a decent track record of upsetting entrenched incumbents. 

Sample this monthly telecom subscriber report clearly showing Jio converting BSNL landline and broadband subscribers:

Shruti Gupta | Entrackr

Now imagine Jio flexing those muscles to convert price sensitive DTH customers with its JioFiber set top box, which supports streaming. If Jio has a price advantage for wireless telecom services, the economics of fixed line broadband are just something else. Reliance can plug its STBs into TV-heavy households at a very low cost, and just stream the IPL as though it were any other TV channel. All without having broadcast rights. This will take regulatory and marketing leverage to pull off, of which Reliance has a decent amount.

Paying subscribers: This may well turn out to be the least exciting monetization angle, given how price sensitive India is. Even though the NFL is more valuable than the IPL right now, it only has around 17 million yearly viewers on average. If the per-match value of Indian viewers matched that of the NFL, each match would be worth over Rs 1,800 crore.

Obviously, that’s not the case, so paying subscribers are a minority. At the very least, very few paying subscribers exist who would be willing to pay a substantial amount, considering the cost of each match. Even a ‘premium’ service like Disney+’s highest tier in India has never been priced at more than Rs 299 per month. OTT services’ pricing across the board suggests widespread consumer hesitation to pay substantial amounts of money for content, even among the richest customers in the country.

So the cold hard truth is that IPL pricing can hardly rely much on subscriber money. Money from users, if not a rounding error, will cover technology expenses at best. The one exception is users in foreign territories where high cable fees may well let Times Internet (and Reliance) make a decent profit on the back of lower licensing fees. But Voot’s pricing will likely increase; at the scale of the IPL rights purchase, it will take some special effort to find the right number.

All things considered, IPL monetization should be a brutal exercise in expanding market power, leveraging and increasing distribution, and attracting as much marketing effort as possible. Star will benefit from its established TV presence and experience with the property. For Viacom18, it might just end up becoming an issue of how much of the price, or missing profits are put down to the cost of doing business or market share gains thanks to the property in the initial years.

With subtlety long gone when it comes to pushing messaging across, prepare to be surprised, amazed, shocked and bamboozled by at least some new ‘innovation’. Maybe a product launch every match? Finding 74 products to launch at a couple of millions per launch is just the sort of innovation that won’t surprise the viewers anymore.

One thing’s for sure. The IPL’s motto “Where talent meets opportunity” just went way beyond the players who play in the league.

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