Indian Tycoon Ambani takes on Disney in the world’s richest cricket league

There is much more at stake than winning a cricket match on Friday when Indian all-rounder Hardik Pandya and his Gujarat Titans take on Chennai Super Kings, whose star players include England’s Ben Stokes, in the Indian Premier League opener.

The game, played in front of up to 100,000 fans in Ahmedabad, marks the first full-scale, nationwide edition of the IPL, the world’s most glamorous and lucrative cricket tournament since 2019, after the pandemic led to years of condensed seasons. a handful of places.

But the new season also kicks off fierce competition off the pitch. After a five-season monopoly on IPL rights, US entertainment giant Walt Disney is battling with newcomer Viacom18 for a partnership between Mukesh Ambanis Reliance Industries, Paramount and an investment group led by James Murdoch and former Disney executive Uday Shankar’s viewers and advertisers. after losing the streaming rights in a record $6.2 billion auction last year.

Disney, which continues to televise the competition, had used its IPL dominance to build one of India’s most successful media companies. This included its lucrative Star TV network, India’s largest, and its Disney+ Hotstar streaming platform, which, with more than 50 million subscribers, grew far larger than rivals such as Netflix in India.

However, Viacom18 wants to use the competition to build India’s leading digital media brand. Its deep-pocketed largest owner, Reliance, has long used aggressive discounting and price wars to push into new business areas.

Viacom18 is preparing an all-out assault on television, according to a person familiar with the plans, including streaming the competition for free on its JioCinema platform to undercut Disney’s pay-TV model. It is also courting advertisers and has hired several former Star executives, analysts add.

Viacom18 wants JioCinema to become the default destination for most people, the person said. Because [the company] decided to remove barriers to entry. It’s a bold call.

Since 2008, IPL has become the world’s leading domestic cricket tournament. The shorter Twenty20 format, with games lasting around three hours compared to five-day Test matches, proved suitable for television audiences, attracting the world’s best players and hundreds of millions of viewers.

Advertisers, broadcasters and investors have flocked to the 10-team league, whose franchise owners include a host of Indian conglomerates as well as foreign investors such as CVC Capital Partners, which spent $750 million on the Gujarat franchise in 2021.

The importance of the IPL to media groups was revealed when Disney and Viacom18 each spent around $3 billion last June on TV rights and digital rights respectively between 2023 and 2027. These record sums made the IPL the second most valuable sports tournament in the world on a per-match basis.

This meant an immediate surprise to the team’s owners, who are protected from player salary inflation by the salary cap, even though rights revenue doubled. This revenue is significantly higher for the teams, said Mike Fordham, former manager of Rajasthan Royals. They are even more profitable than they already are.

However, for Disney and Viacom18, this battle could prove costly. Although rights have increased, analysts and executives expect ad revenue to remain flat as the economic slowdown weighs on corporate ad budgets.

Media Partners Asia, a consultancy, estimates that this IPL season will attract around $550 million in advertising revenue, while the total cost of rights for media groups is equivalent to $1.2 billion a year.

It is a very, very difficult proposition for these two broadcasters to get positive cash flows from this,” said Santosh N, managing director of valuation firm D and P Advisory.

However, for Viacom18 and Reliance, owning the IPL digital rights is a valuable tool in the conglomerates’ long-term efforts to build businesses around digital services and sports.

It’s a very, very difficult proposition for these two broadcasters to get positive cash flows from this

Reliance, whose core business is oil refining, has expanded into telecommunications in recent years, and its operator Reliance Jio has grown into one of the largest in the world with around 400 million subscribers. Reliance also owns the IPL franchise, Mumbai Indians, and JioCinema already streamed last year’s Fifa World Cup in India and the inaugural edition of the Womens IPL this month.

Viacom18 hopes to use free access to the IPL to build mass appeal before introducing packages that charge customers for premium content such as Paramount’s Hollywood blockbuster, a person familiar with the strategy said. Viacom18 did not respond to a request for comment.

Vivek Couto, Executive Director, MPA said: I don’t think Jio and its partners will like it [the IPL] like anything but a loss leader…sports is a loss leader all over the world. It builds a platform and builds viability.

However, Disney is playing defense, Couto argued. Disney+ Hotstars subscriber base has already dropped from 61.3 million to 57.5 million in the last three months of 2022. It has also lost premium content from HBO, which was previously hosted on the streaming platform in India.

We have always been the dominant leader in the broadcast space, Disney India said, adding that its Star Network reaches over 700 million viewers per month. It added that the impact of losing the IPL on our digital platform will be largely addressed through our entertainment offering in marquee films, shows and marquee cricket events such as the ICC World Cup and Asia Cup.

A person familiar with Disney’s strategy admitted that its streaming platform will lose a very small number of subscribers as digital viewers tune into JioCinema to watch the IPL.

But the company is betting that TV will prove more durable for advertisers at a time when marketing budgets are under pressure.

The person added: TV in India is a mature market, it gives you the reach to command a superior advertising dollar.