Saturday, February 24, 2007

Cricket rights, BCCI and Neo Sports

Indian cricket allows for brash and innovative deal making. There is a lot of money riding on Indian cricket and poor management at all levels makes it very difficult to decide exactly what the size of the potential is. This results in heavy speculation.

No sports anywhere in the world has seen television rights value multiplying like the way Indian cricket has. A quick update of history here for your consumption. Before Jagmohan Dalmiya and IS Bindra started managing BCCI, Indian cricket matches were broadcast by state owned Doordarshan. Doordarshan made all the money (or none at all) and never thought of actually paying BCCI. Doordarshan probably thought it was its divine right to produce and broadcast cricket (and other sports) staged in the country. On its part, BCCI also did not know that it can ask the telecaster for a rights fee.

In 1993, BCCI for the first time tried getting a private broadcaster to produce matches (Hero Cup) and sell the broadcast to a private channel. This resulted in Doordarshan blocking the coverage by unfair means. Indian Customs was used to block the cameras from being taken inside the country. VSNL (at that time owned by the government), an uplinking company, was forced to not uplink the television signals. This resulted in a court battle, at the end of which it was established firmly that BCCI could sell cricket telecast rights.

India had started on a liberalisation process and private TV channels were coming to India, transmitting through satellite. Large dish antennae and cables strung over lamp posts were used to transmit the signals to homes. ESPN was in India, and so was Star Sports. Both these channels started looking at cricket as a big growth engine and started fighting amongst themselves and jacked up the rights fees.

Then, the two channels merged to create ESPN-Star Sports.

TWI negotiated a deal to bring Indian cricket on cable and satellite (C&S) television ESPN from 1995-1999. The five year deal was valued at approximately USD 5 million. This was also the period that saw Harsha Bhogle fronting cricket commentary for ESPN and technological innovation started coming into Indian cricket production.

ESPN-Star Sports also brought overseas cricket to India, matches involving India as well as matches between other teams.

This was the golden period for Jagmohan Dalmiya as he consolidated his position in BCCI. In between, 1996 World Cup happened, jointly organized by India, Pakistan and Sri Lanka (PILCOM) which was produced by Worldtel of Mark Mascarenhas. (Today Dalmiya is accused of embezzlement during that World Cup and has been stripped off his posts and memberships and is facing criminal prosecution.)

In the meantime, Dalmiya had squeezed himself into a powerful position in ICC as its President and set out his goal of generating money for ICC. Thus, he defined specific events for which ICC will hold rights and created the concept of ICC Championship Trophy (also called mini world cup). The 1999 World Cup held in England did not generate any income for ICC, but the subsequent Wills Knockout in Bangladesh did. Since then ICC events have been generating massive revenue. (The latest ICC global rights have been sold for around $1 billion to ESPN-Star Sports.)

When the Indian cricket rights were up for renewal in 1999, Prasar Bharati emerged as a surprise winner. The state-owned broadcaster agreed to pay the cricket board $54 million (Rs 227 crores) for five years (from Sep 1999 to Apr 2004). ESPN-Star Sports and other private players were beaten, and the rights fee jumped ten fold from $5 to $54 million!

Now Prasar Bharati set out to maximise its revenues. It ran the first series - India vs New Zealand - shoddily. Then, under Rajiv Ratna Shah, set out to generate massive income for the remaining 4.5 years of rights. It broke the rights into two parts - overseas distribution and India airtime rights, for the telecast in Doordarshan channels.

The airtime sales rights were picked up by an associate company of Zee Telefilms called Buddha Films, which bid a massive $120 million (Rs. 450 crores) for the same. Other bidders were TWI-Stracon and Nimbus.

TWI-Stracon, however won the overseas distribution contract by bidding $43.75 million.

Thus, within six months, Prasar Bharati turned the $54 million contract around for more than $160 million.

TWI, for its part, wrote into the contract just about everything it could, and created a funny thing called "multimedia rights" which was so poorly defined. Prasar Bharati thought it still had the "Internet rights" which it could sell further.

Prasar Bharati decided to offer non-exclusive Internet rights for all comers at "an annual license fee of Rs. 25 lakh" which included "scoreboard, analysis, graphics, stills (up to 30 frames per minute from the live signal) and interviews with players (this may include pitch report, weather report, interview on the captains, players and experts)." But it added, "if the license-holder, however, desires to have live and delayed streaming audio and video after obtaining the Internet rights from Prasar Bharati, it will have to approach Stracon-TWI who hold the multimedia rights.

In the end, none of the Internet portals bought the Internet rights from Prasar Bharati. But TWI found a sucker in PCCW's now.com and sold a bunch of things to them including live video streaming, some kind of extended highlights for their TV operation etc. for something amounting well over $26 million.

Then, when PCCW sort of collapsed, TWI brokered a deal selling the rights held by Now.com to ESPN-Star Sports. This resulted in ESPN-Star Sports running extended highlights for India matches (which ran for well over 3 hours for each day!). This resulted in Prasar Bharati suing them, and getting an injunction in the courts preventing ESPN-Star Sports from broadcasting these extended highlights.

TWI also ensured that PCCW's streaming rights (outside of whatever Prasar Bharati thought) were exploited properly, by teaming up with Wisden.com to offer serious commercial cricket streaming.

It was clear that when this set of rights came to an end, BCCI will look at getting even more from its rights and the fight for the rights will be acrimonious.

That is what happened, and a period of chaos ensued.

Dalmiya still had control over the BCCI. He was in charge of rights negotiations. ESPN-Star Sports was the front runner. Prasar Bharati was not going to get involved in the bidding game in a big way as it was pushing the government to come up with a legislation for any winning bidder to share the terrestrial rights with Prasar Bharati on a revenue-sharing basis. Sony Entertainment Television had acquired ICC rights during this period for a whopping sum. Zee was aggressively looking at expanding into DTH space. Both were going to bid. Ten Sports, another sports channel was also in the fray.

The BCCI bid document was quite harsh as it demanded substantial experience in showing International cricket in its channels for two years. In the end, Zee bid $260 million (Rs 1200 crores) for four years. ESPN had bid $230 million, Sony TV at $140 million and Ten Sports at $115 million. But the story did not end there. BCCI disqualified Zee's bid on technical grounds and invited ESPN for further negotiations.

This resulted in Zee going to court against ESPN and BCCI. Nothing happened for the next year or so. The courts ruled that till the cases were disposed off, Prasar Bharati will show the matches in Doordarshan and will keep an account of the money.

In between, a further rebid happened, further lawsuits, further chaos.

Then, a palace coup happened and Dalmiya was removed from BCCI, Sharad Pawar, a Union Minister won, and took control of BCCI. This resulted all earlier bids being withdrawn and a new bidding process put in place. Various cases were withdrawn.

In the meantime, the government had come up with broadcast regulation rules which stated that any private channel having telecast rights to any cricket event (whether staged within India or outside) must share the clean feed with Prasar Bharati for terrestrial broadcast on a revenue-sharing basis. Ten Sports contested this in courts and kept winning. Still, everyone thought the BCCI rights values will be lower because of government rules.

However, Nimbus came from nowhere to bid a massive $612 million for the next four years (March 1, 2006 to March 31, 2010) during which time there was a guarantee of 22 Tests and 55 ODIs to be played.

Thus, in three successive terms, the rights fee has jumped from $5 million (5 years) to $54 million (5 years) to $612 million (4 years).

Nimbus has taken a massive punt in bidding so high. The first series was shown on Sahara TV, a free-to-air channel. Subsequently, Nimbus launched its own channel called Neo Sports (and Neo Sports Plus), and showed the next two series there.

In the meantime, the government came up with an ordinance forcing private broadcasters to share the matches with Doordarshan. Nimbus refused and offered only a time-delayed (7 minutes) feed to Doordarshan. This prompted the government to issue a show-cause notice to Nimbus. On the other hand, TRAI - the broadcasting regulator attacked Nimbus' pricing policies. Four metro cities were being moved into CAS (Conditional Access System), where TRAI had mandated that each channel must be priced only at Rs. 5 (whether it is a sports channel or a movie channel or a nothing channel!), and in non-CAS areas, the pricing must be discussed with TRAI first and only with the approval of TRAI, the pricing can be enforced.

Nimbus had, in the meantime, done a deal with Star distribution to distribute its channels, and Star had promised a minimum guarantee of approximately Rs. 600 crores to Nimbus for the four-year period. The two channels were priced at Rs. 58.50 but TRAI hads slashed them to Rs 37.25 for non-CAS areas and Rs. 5 each for CAS areas. This is going to seriously impact Star and Nimbus' revenues. Another thing that will impact Nimbus' advertising revenues will be whether the government's ordinance can withstand judicial review.

The government is also trying to talk to BCCI and the channels in sorting out the sports broadcast ordinance. But BCCI will mostly side with Nimbus and sports channels on this one. A lot will depend on the judiciary now.

BCCI has, in the meantime, also created a new set of overseas rights, where it will conduct matches in neutral venues like Malaysia, USA, Dubai and so on. Telecast rights for such matches have been sold off to Zee for $ 219.15 million for five years (April 1, 2006 to Mar 31, 2011), during which time at least25 matches will be conducted.

BCCI and ICC have made a lot of money from Indian television channels. It is not clear whether the numbers can be justified in the long run though.

4 comments:

  1. Do you give me a figure how much would be the annual reveue of BCCI and what they are giving to the players?

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  2. There might be another twist in the story...where do u think neo sports came up with that sort of capital to buy rights?..link-ups with BCCI and Hon Sharad Pawar?

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  3. Hi,
    A very well-written and detailed account of cricket and its control by the BCCI. I was wondering if you could tell me when these rights are given, can it be called an outright sale? If yes/no have there been any judgments stating the same. Moreover, if not a sale will these right fees fall under the provision of royalty under the Income Tax Act? Thanks.
    Smita.

    ReplyDelete