Saturday, June 28, 2008

IPL 2008. A Businessman's Guide

Q. How are these huge TV coverage amounts recovered?
World TV rights for the IPL at a $100 million per year would seem realistic when one considers the prevailing market trend;
· The total advertising through TV on cricket in India would be around $ 450 million (Rs 1,890 crores).This is out of the $1,600 million (Rs 6,720 crores) that TV as a medium gets. Cricket corners 28% of the advertising revenues generated through TV.
· BCCI collected $612 million (Rs 2,570.4crores) from Nimbus Communications for the global media rights to all international and domestic cricket owned or controlled by BCCI to be played in India from 1 March 2006 to 31 March 2010.
· ESPN Star Sports has won the audiovisual rights for ICC events from late 2007 to 2015 for $1.1 billion (Rs 4,620 crores). This includes two World Cups -- Asia (2011) and Australasia (2015).
· Global media rights for one-day internationals (ODI’s) at neutral venues (places like Abu Dhabi, Holland, the U.S. and Malaysia, where cricket is not very popular) has been given to Zee Telefilms for $220 million (Rs 924 crores). This contract runs up to March 31, 2010.
Not surprisingly therefore, the IPL generated around Rs 600 to Rs 700 crores in television advertising revenue this season, which gives it a 10% of the entire TV spends. It is television coverage rights that has made the game and the event viable and justified the huge amounts invested in it. Everything revolves around the platform and audience that it provides advertisers to promote their products.
The fortunes of Sony SET-Max which took up the rights changed dramatically after this event, given the viewer ship and the commercial rates than it commanded from advertisers. Viewer ship was driven by the almost perfect timing of the event. Evening telecast from 7pm to 11 pm in most cases and the fact that the summer vacations were on, made a huge difference.
Most households have a single TV. The ratings show that the remote was won by the men and children. The TRP ratings were between 5 and 8. The final had a TRP of close to 10 and the semi finals close to 6. The opener had almost 8+. TAM estimates that more than 99 million viewers tuned in from April 19 to 24th May. Nearly 64 million watched the 2 semi finals and finals put together. The universe of viewers in cable connected households is around 117.1 million (AMAP Data) and therefore this seems a fairly impressive number. The ratings for Sony was at the cost of the other GEC channels, naturally and the ‘saas bahu’ serials and even Paanchvi Pass showed a fall in ratings. Ratings dropped from 6 to 4.8 for some of the top ranked programs, giving Sony SET Max and IPL a 29% share of prime time during the 45 days of the IPL. The IPL ratings and the attendance at match venues also cannibalized on the footfall in malls and multiplexes as the data seems to indicate. ‘Tashan’ from the Yashraj Films, U Me aur Hum and Krazzy 4 were some that were in the casualty list of the IPL juggernaut. While the quality of the movies could be factors the comparative results in overseas markets is a good cross reference. The 3pm,6pm and 9pm shows were hit badly and U, Me aur Hum which opened at 30-35%fell to 15 to 20% occupancy in the domestic circuit (flop). Overseas it did Rs 6 crores of business in 3 days . Estimates say that the 25 crores film would bring in only 9 crores from ticket sales in the domestic market. Krazzy4 with its ‘thump’ copyright issues opened to a 70% occupancy, but fell drastically to 25% by the end of the week. The 10 crores movie is expected to make only 7 crores at the domestic box office. Its overseas collections were 3 crores in 3 days. All rules have exceptions and the movie Jannat which is based on betting and the rigging of international cricket matches did well. In fact the actors in this movie were chosen as anchors by Sony SET Max, much to the disappointment of many males who hoped to analyse Mandira’s vital statistics as she tried to make sense of the games statistics.
Unofficial estimates (it can’t be official can it?) put the betting business at Rs 20K crores for the IPL. The format of the game proving to be an ElDorado for this business!! This possibly explains the success of the movie too! Bob Woolmer’s death, the Azharuddin, Hansie Cronje controversies are still in the cricket lovers mind and this has been leveraged in the movie though in an oblique manner as a coincidence!!
Healthy Returns for SET Max the stake holder of the TV rights.
Revenues earned by Sony SETMax from this event have been quoted by many publications have been at Rs 300 crores. Revenue market share of SET Max has gone to 28.8% from 5.7% for the 1.5 mths. A detailed examination of Sony SETMax Income and Expenditure for this project throws up these highlights:
· SET and the Singapore-based World Sports Group bagged broadcasting rights for 10 years for $1.026 billion
(Rs 4,309crores).
· Of this, $108 million (Rs 453.6crores) has to be spent on marketing the game over 10 years. Per annum spend US$10.8mln (Rs 45.36crores).
· This brings down the actual cost to $ 918 million (Rs 3,855crores). Per annum spend US$ 91.8mln (Rs 385.5crores).
· Sony will have to pay $316 million (Rs1,327 crores) in equal installments over the first five years and $608 million
(Rs 2,554crores) over the next five. Can opt out after the first 5 years. Actual annual payout in the first 5 yrs: US$ 63.2mln
(Rs 265crores).
· The total payout commited by Sony SETMax when clubbing promotion cost and rights is Rs 310 crores per year.
(Rs 265 crores + Rs 45.36 crores). US $ 74 mln.
· The amount earned by Sony without deductions from domestic sale of commercial time is estimated at Rs 776 crores. Overseas figures which accrue to WSG should come to Rs 60 crores+.
· The commercial time available with Sony is of two kinds, commercial and on-screen. Commercial time includes sponsorship slots and spot buys. The average commercial time sold per match is 2162 secs during the first 56matches. The remaining 3 matches could be 2,500secs.
· On screen has been sold as pop up, pushback, action replay, scrollers and paste up. (Pop ups have been dominant taking up 72% of the share, according to Adex. This is mostly by DLF) .The others have been by sponsors of the league or the franchisees. Rates would therefore be heavily negotiated. The average time per match could be 13,764 secs for the first 56 matches and around 15,000 secs for the 2 semi’s and the final each.
· The total time sold and revenues have been worked out in the next chart. The revenue comes to Rs 776 crores from domestic sales.


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