Digital rights value to be much higher than TV for cricket series 2023-23: Elara Capital

As per the report, Elara Capital expects the final media rights value to be in the range of INR 65-75 billion, 77% higher than base and 32% higher vs the earlier cycle on a like-to-like basis, after factoring in fewer matches at INR 0.75-0.8bn per match.

As per a latest report, Elara Capital expects digital rights for cricket series 2023-23 to be sold at a bigger premium than TV, similar to IPL. However, on a per-match basis, they expect digital rights value to be much higher than TV rights as compared to IPL, where both TV and digital were largely on par (~INR 575 bn per match).

BCCI will auction the media rights of the bilateral cricket series for 2023-28 cycle, which is a mix of 88 matches across multiple formats (ODI, T20 and Test). Elara Capital expects the final media rights value to be in the range of INR 65-75 billion, 77% higher than base and 32% higher vs the earlier cycle on a like-to-like basis, after factoring in fewer matches at INR 0.75-0.8bn per match.

The Board of Control for Cricket in India (BCCI) has kept TV and digital rights of the bilateral series in two packages at INR 200mn and INR 250mn per match, respectively, for 88 matches within the cycle (25 Tests, 27 ODI and 36 T20I); the combined base price stands at INR 39.6bn. The BCCI expects at least INR 600mn per game at auction, which translates into a base price of INR 52.8bn via the eAuction process. Elara Capital predicts that this may cancel the process if the numbers are not breached. During CY18-23, the BCCI had earned INR 61.3 bn from Star India for 103 matches, with a price per international game at INR 600mn (TV and digital). The base price for this cycle’s media rights is 25% lower per match than CY18-23; IPL auctions, on the other hand, during CY23-27 had a base price that was 47% per match higher than the earlier cycle.

Triggers

Elara Capital further expects the BCCI to garner 1.6-1.9x of base price, that is ~32% higher than earlier cycle rights on a like-to-like basis, as the number of matches has come off by 15% vs the earlier cycle, as the current base at INR 450mn per match is already 25% lower than the last cycle’s price of INR 600mn. On a like-to-like basis, IPL's number of matches went up ~37% in the current cycle and it garnered 1.5x of its base price. It translates to 2.2x of last cycle’s final price, as its base price was 1.5x of earlier cycle, as per Elara'a note, Digital yorker seals ‘IPL auction’ innings.

Sharp growth in IPL media rights price (like-to-like), was due to higher inflation in cricket pricing than other genres (0.8x growth over a five-year period at a CAGR of 12-13%), firms taking part in the bidding process on the digital side, including global OTT giants, and scarcity premium as cricket is an important strategy for any platform to increase scale on digital. However, the BCCI is keeping the base price lower at 25% than the price of the past cycle, which indicates likely low demand and wanting to attract interest from platforms. Premium in these media rights could be lower than the earlier cycle, due to 1) fewer platforms bidding, 2) curtailed ad spend of new age & commerce firms, and 3) IPL revenue decline of 20-25% YoY in CY23 (TV and digital).

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Elara Capital expects final bid of INR 65-75 bn at a premium of 77% over base price and at a premium of 32% over the past cycle’s price, which in turn, translates into a per match price of INR 0.8 bn. IPL had garnered a premium of 47% over high base price (2.2x higher than earlier cycle); in this case, premium is likely to be lower as final auction value depends on 1) the countries that will come to tour India, and 2) lower pricing for ODI & test matches (50-80% lower than T20), as T20 attracts the most premium pricing due to higher concurrent viewership. Here, Elara expects premium to be higher than the base price for digital for these media rights too (just like IPL), as TV rights premium may be in the range of 30-40% over base price whereas digital rights premium could be in the range of 80-90%, which translates into a per match price of INR 0.8bn (TV and digital). Elara Capital further believes this pricing is justified as it will gives platforms an opportunity to breakeven or turn profitable.

India’s ad environment may turn conducive in CY24, led by:

1) profitable new age & commerce firms

2) inflationary pressures cooling off

3) emergence of Meta, Web 3.0 & 5G

Watch the Diet

Potential recovery in ad revenue in the medium term, with a more reasonable base price for media rights may augur well for OTT and broadcasting giants.