afaqs!

Advertisers will have to pay more post Star-BCCI deal

By Anindita Sarkar , afaqs!, Mumbai | In Media Publishing | April 03, 2012
STAR TV has paid Rs 3,851 crore for the deal, much above the amount paid by Nimbus. Evidently, STAR will have to bring in a 25 per cent hike in revenues from its latest acquisition in order to compensate for the difference.

The Star Group's six-year deal (July 2012 to 2018) with the BCCI, the national governing body for all cricket in India, to acquire the media rights for international cricket played in India is a well carved out finish of the final bidding process. However, one cannot deny that the decision has come at a higher price when compared to what Nimbus was prepared to cough out for the same property. Also, one cannot overlook the fact that the latter could not generate enough money for the property - leading to a default on payments and thus termination of the four year deal (from 2010 onwards).

Covering 96 matches, STAR TV has paid Rs 3,851 crore for the deal, much above the amount that Nimbus had paid for the same (Rs 2000 crore).

On an average, the STAR Group will pay Rs 40 crore per match to BCCI, up from the Rs 32.5 crore per match that came in from Nimbus, before its contract with the BCCI was terminated last year on the claim that Nimbus had defaulted on payments.

R S Suriyanarayanan

Navin Khemka

Dinesh Rathore

Quite evidently, STAR will have to bring in a further hike of 25 per cent in revenues from its latest acquisition in order to compensate for the higher price paid.

There is almost a unanimous call that the network would have to increase the ad rates of the property by at least 15-20 per cent to fill this gap.

For the record, with Nimbus, the BCCI property was being sold for Rs 2-3.5 lakh per 10 seconds for ODIs. For test matches, the price varied between Rs 40,000-75,000, depending upon the teams that played. (For ODIs, the advertising seconds averaged between 6,000-6,500 seconds; while for test cricket, it is anywhere between 5,500 -6,000 seconds a day).

Despite such rates, if Nimbus failed to bring in the requisite monies, will STAR be able to attract advertisers for the property coupled with an increased ad rate?

R S Suriyanarayanan, business director, LMG says that currently, ESS controls major cricketing countries, and with the BCCI deal coming on board, the network could work on the chance to completely take over the cricketing business.

"ESS already has the ICC tournaments, the Australia board, the England board and the domestic Champion's League T20. Now, with the BCCI coming in, it could be a complete game changer for the network," he says.

Also, with the rights to broadcast Ranji Trophy, Duleep Trophy and Irani Trophy resting with STAR now, the conglomerate could create an overall differentiated package which could help sell such domestic events better. "This could lead to an increased viewership and thus more advertiser attraction," Suriyanarayanan adds.

Navin Khemka, managing partner, ZenithOptimedia believes that the deal has happened for good since ESS is more proficient at selling a game like cricket.

"The matches that were shown on Neo were too cluttered. Almost every space was sold to bring in the revenues and this created a viewership block. STAR, on the other hand, is better at packaging and delivers quality viewing to the content. Therefore, it is expected that there will be less advertising clutter on the channels, making the viewership more pleasurable and thus pushing up the ratings," he notes.

And, it's not only the increased ad rate from which the STAR Group could gain. Many note that with the metros going digital, STAR's option to earn revenues through subscription could also go up significantly (an estimated 15 per cent).

"The advantage with cricket is that a substantial amount of revenues can be generated through subscription, and if digitisation finds its way as per the sunset date, it could help STAR earn more revenues," says Dinesh Rathore, vice-president, Starcom MediaVest Group.

Moreover, the deal also includes digital rights. With 3G proliferation finding more firm ground in India, STAR could leverage on it, thereby adding value to the overall revenue generating streams of the BCCI property.

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