At one time, ESPN-Star Sports was the undisputed leader of cricket broadcasting in India. Then new kids on the block like Sony (that have the rights for the 2003 and 2007 World Cups), Zee (that bid $219.15 million for non-ICC matches played on neutral territories) and Nimbus Communications (that bid $612.18 million for a four-year contract of BCCI-owned properties) realised this is where the big bucks were, and started outbidding ESPN-Star Sports for major cricketing rights.
ESPN-Star then banked upon its other properties such as Formula 1, English Premier League, 2006 Fifa World Cup, tennis grand slams like Wimbledon, and so on. It still possessed the rights for cricket matches played in England, Australia, South Africa, New Zealand and Zimbawe. Even so, cricket-obsessed Indians wrote them off.
A fortnight ago, ESPN-Star Sports silenced its competitors by bidding $1.1 billion to acquire 18 ICC tournaments from 2008 to 2015 that includes two World Cups (2011 and 2015), a minimum of three Champions Trophies, two Twenty20 World Championships, four ICC under-19 World Cups and a Women's World Cup. ESPN Software (India) Pvt Ltd's Managing Director R C Venkateish spoke to Surajeet Das Gupta and Nayantara Rai. Excerpts:
Have you overbid?
Not at all. We do not blow our brains and buy out properties. There is always a detailed business plan behind each and every one of our bids. We are a responsible joint venture company and answerable to our shareholders.
How is it commercially viable?
Look at the 18 major tournaments on offer. They include two ICC World Cups, two Twenty20 World Championships, a minimum of three Champions Trophy, Intercontinental Cup, four under-19 World Cups and a Women's World Cup. Then the time frame of the contract is eight years, which allows us to leverage each of these properties over a large period of time.
Also, you can never replicate a World Cup and we have two of them now.
A broadcaster makes around $2 million from an ODI today. It's only going to go up, let's see by how much by 2015. With this acquisition, we are projecting high double-digit growth in the next three years. You must also evaluate our bid in the context of the increasing household economy.
What kind of an impact do you foresee from the Twenty20 World Cup?
It's a significant addition. It's like going back to the Kerry Packer days when the crowds had gone back to cricket with the advent of day-night one-day international games. Twenty20 is a compact form of entertainment, typically played in England and Australia after 5 pm, at the end of a working day. It's going to have a Kerry Packer effect.
How will your advertising revenue be affected?
We are looking at signing up advertisers who make a big commitment to the channel. We are looking at eight to 10 major advertising partners in tranches of two to three years. That would represent 60-70 per cent of our advertising pie from the properties we have won. TRPs based on cricket swing between six to 15 depending on the performance of the Indian team.
What kind of revenue does the 60-70 per cent of the pie represent?
Early days for that but I would imagine around $10-20 million per series. Sometimes, what would happen earlier was that the broadcast rights would be given out too late. But this contract is for eight years -- so we have more than enough time to chalk out an excellent business plan.
What about competition for spot rates from soaps and reality shows?
Soaps are cyclical, and ratings of soaps are down from 14-15 to between six and seven now. And women not watching cricket is only a myth. Viewership from women is 40-45 per cent. Market fragmentation is great for sports broadcasting.
Since there are no driver programmes for reach, it has to be cricket! The game, therefore, becomes even more valuable. Nothing can hold the audience for eight hours except cricket.
The worst slide is six to seven, on the TRP-scale, which was the case when India got hammered by South Africa in the recently-concluded ODIs. But, these ratings are the peak ratings of soaps today. Many advertisers have discovered that cricket works and some who had left this domain are back.
I'm not going to name them! And please remember, spot rates are only indicative figures. We also get revenues from tag lines and features. Cricket is one unique game -- every four minutes there is a spot.
Rates of $20,000 for a 30-second spot have been achieved before. Maybe one day we'll see $2 million per spot as in the case of the Superbowl! Whenever India plays a grade-A team, there is always a situation of demand exceeding supply, so we'll have more than just an adequate ad inventory.
Are you looking at exclusive tie-ups with advertisers?
Exclusivity is not necessary. Since we are the global production partners, we can always do innovative things with sponsors, as long as it is allowed by the ICC.
What about revenue from subscription?
Direct-to-home subscription numbers are growing rapidly. Tata-Sky is too new and Dish TV is still penetrating.
What about CAS?
Here, unfortunately, we are left with very few options. The matter is sub judice but we are very unhappy about it. It's unfair to give channels at Rs 5 -- we're being forced to sell in prime areas like Delhi, Mumbai and Kolkata at the same price of bidi packets. Obviously we are taking a significant hit. We have made a case to Trai that sports channels should be treated differently. A channel that bid $1.1 billion for cricket rights is being sold at the same price as religious and comedy channels.
How will mandatory sharing of feed with DD impact you?
Ten Sports got an injuction in the case of the India versus West Indies series. Zee Sports also did not share the DLF Cup. Hopefully, we are moving towards a free market economy!
You had lost cricket to newer players. How tough was that?
It was a testing period. But we discovered the strength of our basic brands. We still had the English Premier League, Formula 1 and tennis grand slams -- that's why we recorded double-digit growth even then. We are very happy with what we did with hockey -- we are trying to build assets like hockey but this takes time. We did the same thing with the English Premier League. And recently, we renewed our rights for EPL and the Euro 2008.
What are the new areas you're looking at?
We have taken a lead in that. ESPN Mobile has already been launched [major networks like Airtel and Hutch give users news, exclusive interviews, scores and video clips from ESPN's team of experts for rates that vary from Rs 50 to 100 a month]. We are increasing our presence on the Internet.
Bandwidth is increasing, and that provides with newer opportunities that we must integrate with wireless. We have a separate business group for mobile and Internet now. In America, ESPN is the fourth or fifth largest in page views.