IPL TV Rights Sold For Rs 23,575 Crore, Digital Rights For Rs 20,500 Crore. Is It A Winner's Curse For Broadcasters?

IPL Media Rights Auction: The media rights for 2023-2027 have been sold for a whopping Rs 44,075 crore for 410 matches on Monday

People walk past a huge replica of IPL Trophy at Bandstand, Bandra ( Image Source :Getty Images )

Mumbai: Disney Star is learned to have won the coveted IPL Indian sub-continent televison (TV) media rights for the Indian Premier League (IPL) for a whopping Rs 23,575 crore, while Viacom18 grabbed the digital rights with a bid of Rs 20,500 crore at the media rights auction on Monday. 

The media rights for 2023-2027 have been sold for a whopping Rs 44,075 crore for 410 matches on Monday, a premium of 170 per cent or 2.7 times the winning bid of Rs 16,347.50 crore for both TV and digital by Star India in September 2017.

Previously, Sony Pictures Network paid Rs 8,200 crore for the IPL TV media rights for a 10-year term at the tournament's debut.

According to the most recent information, Package A of TV is sold at Rs 57.5 crore per match and Package B of Digital Rights for India is sold at Rs 50 crore per match, with a total value of Rs 107.5 crore, putting the IPL in the top tier of all sports in terms of per-match value, alongside the NFL and the English Premier League. (Refer to the chart below)*

NBA – Highest brand valuation in global leagues

League name                                      Country       Brand valuation ($ bn) 

National Football League                         US                   13 
Major League Baseball                             US                   10
National Basketball Association               US                   7.4 
Indian Premier League                             India                6.3 
English Premier League                            UK                   5.3 
National Hockey League                          US                   4.43

*Source: Elara Securities Research

Sony is believed to have paid a premium of 30 per cent over the reserve price as TV medium is largely matured and subject to tepid mid to high single-digit ad growth while Viacom has paid a premium of 70 per cent over the reserve price given it enhances users on any platform and also enables cross-selling of other content and the digital segment has potential to grow at over 30 per cent helped by increased penetration and consumption trends.

However, there is no official confirmation on the winners of Package A and Package B, respectively. Aside from packages A and B, which are television and digital groupings for the Indian broadcast region, there are two other packages in contention: Package C, which has 18-game non-exclusive special matches (base price of Rs 11 crore), and package D, which has rest of the world rights (base price of Rs 3 crore). Both the packages are currently under bidding. 

IPL Rights – Winner's Curse For Broadcasters?

A large-ticket property like IPL is critical for any broadcaster's digital strategy. For example, IPL accounted for one-third of Star's income (TV+Digital), confirming its significance. If Star was to get IPL rights, its revenue contribution was likely to increase to 40 per cent as digital growth accelerates. According to estimations, the IPL accounts for 70 per cent of Star India's AVOD revenue, with SVOD revenue following suit.

According to Elara Securities, IPL will result in a significant increase in various metrics for any OTT platform, such as monthly active users (MAU)/daily active users (DAU). 

"As IPL content costs a substantial premium (Rs 10,000 crore per year), any broadcaster with such rights may not be able to break even until the fourth year (of the five-year cycle), given the TV segment's limited growth prospects. Nonetheless, IPL's FY18-28E TV/digital viewership CAGR is expected to be 1 per cent/ 14 per cent, respectively. TV gross profit margin will peak at 12 per cent in the fifth year whereas digital gross margin will breach 35 per cent in the fifth year," Karan Taurani, an analyst at Elara Securities told ABP LIVE. 

Turani believes that for TV, concerns persist on the subs revenue front which will keep ARPUs under check due to regulatory headwinds while for digital, the premium is a tad lower than our estimate, as many tech giants did not end up bidding for the same and backed out. 

On an overall basis, the valuation of the rights at over Rs 44,000 crore is likely to go up to Rs 50,000 crore once the bidding for Package C and Package D for cluster rights and overseas package ends on Tuesday.

On the above basis, TV rights have moved up 2x as compared to the earlier cycle, backed by 40 per cent more number matches and inflationary trends in pricing. Digital rights on the other hand may breach 5.5x (including non-exclusive cluster) versus earlier cycle backed by better viewership growth and penetration opportunity.

The IPL revenue for teams is estimated to grow 2x towards Rs 650-750 crore helped by a jump in media rights and an increased number of matches. PBT margins too are likely to move towards a range of 30-40 per cent, from the current PBT margin of 15-25 per cent, which is likely to impact team valuation positively, and May breach towards Rs 8,000-10,000 crore mark.  (Refer to the chart below)*

IPL Team Valuations: Mumbai Indians are most valued

Team                                       ($mn) Valuation               Revenue 

Mumbai Indians                       1,320                                         33 
Chennai Super Kings                1,173                                        41.2 
Kolkata Knight Riders               1,120                                        41.2 
Lucknow Super Giants                945                                         N/A 
Delhi Capitals                           1,053                                         35.4 
Royal Challengers Bangalore   1,040                                          36.4 
Rajasthan Royals                      1,013                                          31.7 
SunRisers Hyderabad                 987                                          31.8 
Punjab Kings                              933                                          31.2 
Gujarat Titans                             747                                          N/A

*Source: Forbes Report on IPL

In terms of market cap, the biggest delta market cap is for SUN TV which as the team will contribute almost 40 per cent of market cap post new valuation, whereas, for United Spirits, it will be 18 per cent of market cap contribution; for RIL it will be as low as 0.7 per cent. 

The IPL Math

IPL Revenue (100%)

BCCI (50%) Divided between all teams (40%) Divided between top four teams (10%)

Lucknow franchise fetched the highest in bids

Team                                                  Amount ($mn)                 Year                                          Owner 

Mumbai Indians                                       112                               2008                                   Reliance Industries 
Royal Challengers Bangalore                   112                               2008                                   United Spirits 
Deccan Chargers                                      107                               2008                                   Deccan Chronicles 
Chennai Super Kings                                 91                                2008                                  India Cements
Delhi Capitals                                            84                                2008                                  GMR & JSW Group
Punjab Kings                                             76                                2008                              Mohit Burman, Ness Wadia, PZNZ Media
Kolkata Knight Riders                               75                                 2008                               Shah Rukh Khan & Juhi Chawla
Rajasthan Royals                                       67                                2008                              Emerging Media Ltd 
Pune Warriors India                                370                                2011                               Sahara Group 
Kochi Tuskers Kerala                               333                                2011                               Rendezvous Sports World 
Sunrisers Hyderabad                                72                                2013                                       Sun TV Network
Lucknow Super Giants                            945                                2021                                   RP-Sanjiv Goenka Group 
Gujarat Titans                                          749                               2021                                         CVC Capital Partners

*Source: Company data

Note: Deccan Chargers, Pune Warriors India and Kochi Tuskers Kerala were terminated by the BCCI. All the teams were bought for a period of 10 years, except Sunrisers Hyderabad’s five years, which was extended later.