Business

The Only Winners of IPL Auctions: BCCI and IPL Franchises

  • While the world’s richest cricket governing body gets richer, and shareholders of IPL teams do well, investors of media companies that acquired rights seem to be sceptical.
  • The shares of TV18 and Network18 have seen a significant dip since April 27, when the news of Viacom’s interest in the auctions became known to investors.

Business BriefsJun 17, 2022, 09:40 AM | Updated 10:34 AM IST
IPL Media Rights Auction

IPL Media Rights Auction


The recently concluded IPL media rights auction created a wave after the numbers became public.

The Board for Control of Cricket in India (BCCI) sold the media rights for a whopping Rs. 48,390 crores, up from Rs 16,300 crores in 2018.

Disney-Star has managed to hold on to the TV rights for the Indian subcontinent for Rs 23,575 crores. On the other hand, Reliance-backed Viacom secured digital rights in India plus TV and digital rights in Australia, New Zealand, the UK, and South Africa.

The bidders will have exclusive media rights for the 2023 to 2027 period. Disney-Star would pay Rs 58 crores per match for the rights on a per-match basis. The number of matches will be increased to 74 in 2022 and 2023 to attract higher bids from media companies. The number of teams rose to 10 in 2022, as opposed to 8 previously. Around 84 matches are expected to be held in 2025 and 2026, with a further increase to around 94 matches in 2027.

The Growth of Digital Rights

The bidding war had seen fierce competition among behemoths across the board, with many interested in digital rights.

The yearly cost of digital streaming rights has grown significantly over the last twelve years.

In 2013, Times Internet had initially bought the digital streaming rights to IPL for around Rs 160 crores for four years. In contrast, Star India bought the same rights for Rs 302 crores, but for three years.

In 2017, Star India bought the rights again for Rs 1443 crores for five years.

Finally, the rights for the Indian subcontinent are selling for Rs 18,500 crores for five years starting in 2023. On a relative basis, the share of TV rights has decreased as digital’s share continues to grow.

The trend clearly points toward changing viewership patterns in India and a focus on growing digital channels for content delivery. The high prices paid in these bid auctions for digital rights would help the platforms attract more viewers on their subscription-based platforms.

Losing the digital rights to Viacom is likely to hurt Disney-Hotstar’s streaming business since a large number of subscribers joined the platform solely for the purpose of watching IPL. According to a report, it is estimated that the platform could lose around 1.5 crore subscribers after the digital rights shift to Viacom.


Shareholders Unimpressed

Nevertheless, for a certain section of stakeholders, it appears that winning IPL rights is not a boon but a curse. The shares of TV18 and Network18 have seen a significant dip since April 27, when the news of Viacom’s interest in the auctions became known to investors.

The shares of TV18 and Network18 have declined around 49.5 and 40.9 per cent, respectively, since April 27. Over the same period, the shares of the Nifty Media index fell around 19 per cent, possibly indicating that investors aren’t too glad about the decision to buy media rights.

Some industry experts have pointed out that the profitability of previous auction winners did not see any significant increase due to winning media rights.

Investors seem to be worried about the high costs of acquiring these rights and whether an adequate return can be generated on the invested funds.

In another telling incident, a brokerage upgraded an Indian media behemoth’s stock to buy after it was unable to secure any rights to IPL. The behemoth, along with other bidders, did not see a significant decline in the stock price as TV18 and Network18 did.

So far, BCCI and teams are the Only Winners.

In case investors are right, and the media rights do not turn out to be the money-spinners that the acquirers believe them to be, the only winners in these auctions would be BCCI and the teams that play in the IPL.

The money raised through media rights is divided among the teams and BCCI. Around half of the money is kept by BCCI, while a part of the balance is paid out, and a fixed fee and a variable fee are based on team performance. The balance of 5 per cent is divided based on the team’s performance during the tournament.

The cumulative Rs 48,000 to be paid for the rights over the next five years ensures that BCCI and the teams will make a killing over the next five years. With the new auction, each team would see a jump in their earnings through the sale of media rights, from around Rs 165 crore a year previously to around Rs 385 crore a year next year onwards.

While the world’s richest cricket governing body gets richer, and shareholders of IPL teams do well, investors of media companies that acquired rights seem to be sceptical. However, Reliance has managed to turn situations around and outperform its peers on many occasions – whether it can find a way to silence critics remains to be seen.

Join our WhatsApp channel - no spam, only sharp analysis