Indiantelevision.com's interview with Nimbus Chairman Harish Thawani
 

"It will take courage to even offer Rs 5 billion for India rights"

Posted on 5 August 2004
 

This year promises to be a cricket fiesta like no other. It started in January with India finishing their tour of Australia followed by India-Pakistan. We had the Asia Cup that has just concluded that is to be followed by the Holland triangular with India, Australia and Pakistan in August and then the Champions in September. This is not counting important tours in Sri Lanka.

In this scenario the acquisition process gains huge importance in a country where there is a huge gap between cricket and other sports. The most important rights are the ones for India Cricket which come up for grabs shortly.

Indiantelevision.com's correspondent
Ashwin Pinto caught up with the man who probably understands the dynamics of this business as good as or better than anyone in the country - Nimbus Chairman Harish Thawani. A low down on how the cricket acquisition process works in India, the risks involved in the business as well as some in your face comments was what Thawani offered in a freewheeling conversation.

Excerpts:

What are the parameters on which the value of a cricket property is judged?
Analysing ad revenues and judging the impact the property will have on subscription. If it is a short event then you cannot raise subscription. That is why the World Cup last year was so huge for Max. On a match by match basis, a World Cup match will still get you twice the revenue of any other match.

The World Cup runs for 45 days. The Asia Cup is too short a time period to jack up subscription. For Holland the only increase is going to come from advertising. Unfortunately the long events come only once in two years. Of course you could also have an Australia series. However what separates the World Cup from other tourneys is that it has more matches packed into 45 days and has the all the teams playing.

 

Speaking of the World Cup, what is your take on the amount Sony paid to acquire the rights. Some industry watchers say the commonly quoted figure of $ 255 million will be difficult to recover considering new revenue modes like PPV and addressability have still to make their appearance.
If Max paid $255 million (and I cannot comment on what they paid) for the ICC package, then they got it cheap. The increase in subscription for the Sony bouquet and ad revenues from the World Cup last year was huge. The World Cup was the peg around which they were able to build the network and shoot past Zee.

 

Could you provide an overview of how the cricket acquisition process works in India?
In India it often works in mysterious ways. If you trace back the process adopted in the past, the first time that the BCCI offered rights on a commercial basis was in the early 1990s at the Pune AGM.

Even that offering was not a publicised process. In those days IMG TWI it would appear had the right links to the right people. At that time I had gotten a call from the then CSI MD Seamus O'Brien saying there was a process on and would we join hands with them to participate.

The whole process was very obscure. We were not able to figure out what exactly was going on but we made our offer. However the powers that be went with IMG TWI. That was a five-year deal.

In 1998-99 again the deal did not have a formal process. Various parties approached BCCI contacts. But there was no published itinerary in terms of a list of tours. There was no tender document.

We had tabled a Rs 500 crore (Rs 5 billion) offer. I had personally met the then president Raj Singh Dungapur and made the offer. Some members pushed it away saying that they would get better offers. The deal was eventually sold to Prasar Bharati for Rs 230 crores. It was only because Prasar Bharati was involved that rights management companies and broadcasters did not complain. You see, there was no question of corruption. Prasar Bharati is hardly going to pay anything extra to the BCCI.

Remember, Prasar Bharati was not the incumbent at that time and so there was no question of first right of refusal. Prasar Bharati was a compromise candidate agreed upon as the primary rivals knew that the others would not benefit.

Rajiv Shah, who was then Prasar Bharati CEO, played his cards well.

 
"The World Cup was the peg around which Sony was able to build the network and shoot past Zee"
 

So basically what you are saying is that you have cause for worry about how the bidding will be conducted this time round as well. What are your principal concerns?
Firstly, there is some mystery about when the current contract ends. Prasar Bharati argues that it is valid until Australia's tour is over.
Then there is a school of thought in the BCCI that believes the contract is over.

The BCCI (Board for Contol of Cricket in India) may well be the only board in the world that does not have a publicly announced tendering process. The Pakistan board had such a clear process for the India-Pak series. It was incredible. They even published the who-bid-what figures. The trouble with shrouding the process in secrecy is that it can raise so many questions and needless accusations.

In my opinion, the BCCI should have a press conference stating that 'bids are invited from interested parties, these are the independent observers, this is the subcommittee we have formed', etc.

 

The buzz in the industry is that the India cricket C&S rights will fetch somewhere in the range of Rs 7 billion. Is that a fair assessment?
The bidding process will start in the next couple of weeks. The Rs 700 crore (Rs 7 billion) figure is someone just talking it up. It will take courage for someone to even offer Rs 500 crores. There is so much regulatory uncertainty that when push comes to shove, people's hands will shake when they have to sign off on a figure of Rs 500 crores plus.

One of the issues of concern is whether the Supreme Court is going to insist on the rights owner sharing the feed with Doordarshan. If both tests and ODIs are on DD then your pay revenues will go for a serious toss.

When is digital cable coming? What is the fate of CAS? How will DTH grow, will the proposed TRAI regulation that all channels must be made available to every DTH platform become law? What threat does broadband provide? We are on the threshold of several technological and regulatory changes. Taking a Rs 500 crore punt in an uncertain environment requires a braveheart.

Another problem is that the local market ad rates cannot be driven up further without resistance from major advertisers. Look at Coca Cola sitting out of the Asia Cup totally, and several traditional cricket majors taking very, very few spots, e.g. LG, Hutch, Bajaj Auto, etc.

There are other avenues for them on Indian television. This is the single most important factor that cricket must understand. It has little competition from other sports, but cricket is finally eyeballs and eyeballs can be procured on other programming too.

Then you have Rs 400-450 million of production expenditure a year, Rs 200-250 million of promotional expenditure a year. Your package goes up by 60-70 per cent on all the other elements. So a Rs 500 crore bid will actually cost the bidder Rs 800 crore in total project cost!

 

Who are the serious entities for the C&S rights in India?
ESS (ESPN Star Sports), Ten Sports and Max. I would however, not rule out Zee and Sahara.

 
"The BCCI may well be the only board in the world that does not have a publicly announced tendering process."
 

How serious a threat is Reliance?
Reliance will be a broadband service provider. I can't see them wanting to acquire rights, as whoever eventually broadcasts cricket, will in the interests of reach and revenue approach every carrier, cable, broadband or DTH to work out distribution deals; and in the process Reliance will get the product for its subscribers anyway!

 

Will the Ten-DD face off that began during the India-Pakistan tour affect the bidding process?
This is again a hazy situation as the Supreme Court has not passed a verdict. I imagine that this uncertainty will impact the valuation of the Indian cricket rights.

 

Sources indicate that Holland and the Asia Cup had just one bidder each, Max and ESS respectively. Isn't this surprising considering that cricket is the number one sport?
That is not true. Whoever wrote that story got his facts wrong. Do you know that Zee also bid for the Asia Cup? Nimbus Sport also bid and was in fact the second highest offerer.

I don't think that (Zee Group CMD Subhash) Chandra was serious. Zee did not send an offer for the Sri Lanka Board's rights.

 

In your opinion was the price paid by ESS and Sony for the Asia Cup and Holland respectively reasonable keeping in mind the RoI?
The Asia Cup broadcast rights paid by ESS was ballpark okay (reliable sources have told indiantelevision.com that the bid amount was $ 11 million). ESS overpaid (in paying) $ 8 million for the sponsorship rights when everybody knew it was not worth it.

We had offered $ 2.75 million for sponsorship rights and were the second highest (bidder), and I think it would be fair to say we are fairly competent in valuing sponsorship!

 

And what of the Holland Cup?
As far as Holland is concerned, while Sony is estimated to have paid $4-4.5 million I think that it is worth $6 million. Not surprisingly, there was no tender process for the Holland tournament.

 
"Do you know that Zee also bid for the Asia Cup? Nimbus Sport also bid and was in fact the 2nd highest offerer"
 

Could you dwell on the risks involved in cricket acquisitions? A case in point would be the Zimbabwe mess.
First you have factors over which you cannot control like the Zimbabwe players staging a revolt. Then there is the risk that football over the next five years may grow in popularity. In fact, I think that football is the only sport with a serious chance of hurting cricket's share.

The regulatory environment in India is however, the single biggest risk. It could be an issue on the CAS side, the Supreme Court verdict, broadcast bill and what have you.

Another threat is the fact that there will be an overload of cricket in the coming years. Usually you have two home tours and two away tours a year. Now in addition people want to organise a triangular series in Sri Lanka and one here next year.

The way some people are looking at it is, 'How can we maximise the year?' They doesn't realise that the value of cricket will get deflated as a result of too much supply, resulting in viewer fatigue and advertiser apathy. They merely look at the calendar and try to see where exactly they can squeeze in another tournament.

 

What role do sports marketing agencies play on the cricket acquisition front? Have they been pushed out of cricket bidding?
Sports rights management companies act as expert distributors of sports rights, adding value with their insights into various markets, assisting in valuation, packaging the product well, slicing and dicing the rights to maximise revenues and reach with their sophisticated understanding of rights windows (premium pay TV, basic cable, free TV, PPV etc), technologies (3G, GPRS, Broadband, VOD, NVOD etc), subscription and advertising potential of key markets, distribution reach in minor markets, strong contractual and IP skills, good overall understanding of the sports marketplace including issues of audience share, brand nurturing etc.

Some like World Sport Nimbus also provide guarantees including bank guarantees where required. A simple analysis of the global trends would suggest rights management companies are thriving and every sport seeks their services. They bring a science to the business.

 

Have cricket rights for other countries gone up or have they stayed flat?
The value has gone down drastically abroad. The game is losing its market share. Broadcasters are becoming monopolies. In England Sky Sports is the only buyer left. BBC has officially announced that they will not buy cricket.

In fact you might end up giving cricket to them for free or a revenue sharing basis. Channel 4 only wants home tours. Eurosport does not show cricket at all. If you got $100 earlier you would be lucky to get $25 today.

Sky Sports declined the Asia Cup. They did not even want it for free due to a lack of space. Australia also has only one satellite broadcaster that buys cricket: Fox Sports. Ditto in New Zealand and South Africa. A Sony or a Ten do not have global operations.

So they will anyway have to sub-sell whatever rights they get. And will have to face the fact that these virtual monopolies will drive the price down.

All in all, an intriguing phase for the Indian broadcast industry: where the winner of these rights will have a valuable product for perhaps five years but the losers may well say, it was a good toss to lose!

The next few weeks will see expertise, lobbying, financial ability and some less visible moves at work. In the end, it will require a leap of faith!

 
 
 
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